As filed with the Securities and Exchange Commission on February 28, 1997
1933 Act File No. 2-14213; 1940 Act File No. 811-0816
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X__
Pre-Effective Amendment No.____ ____
Post-Effective Amendment No._76_ _X__
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _X__
Amendment No._76_
(check appropriate box or boxes.)
AMERICAN CENTURY MUTUAL FUNDS, INC.
---------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
American Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 816-531-5575
James E. Stowers III
Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Name and address of Agent for service)
Approximate Date of Proposed Public Offering: March 1, 1997
It is proposed that this filing will become effective (check appropriate box)
_X__ immediately upon filing pursuant to paragraph (b) of Rule 485
____ on (date) pursuant to paragraph (b) of Rule 485
____ 60 days after filing pursuant to paragraph (a) of Rule 485
____ on (date) pursuant to paragraph (a)(1) of Rule 485
____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
____ on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the
fiscal year ending October 31, 1996, was filed on December 24, 1996.
<PAGE>
================================================================================
CROSS REFERENCE SHEET
- --------------------------------------------------------------------------------
N-1A Item No. Location
------------- --------
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Operating
Expense Table
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Investment Policies of
Registrant the Funds; Other Investment
Practices, Their Characteristics
and Risks; Performance
Advertising; Distribution
of Fund Shares; Further
Information About
Twentieth Century
Item 5. Management of the Management
Fund
Item 6. Capital Stock and Further Information About
Other Securities Twentieth Century
Item 7. Purchase of Securities How to Open An Account;
Being Offered How to Exchange From One
Account to Another;
Share Price; Distribution
Item 8. Redemption How to Redeem Shares;
Signature Guarantee
Item 9. Pending Legal N/A
Proceedings
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PART B
- --------------------------------------------------------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information N/A
Item 13. Investment Objectives Investment Objectives of
and Policies the Funds; Fundamental Policies
of the Funds; Additional
Investment Restrictions;
Forward Currency Exchange
Contracts; An Explanation of
Fixed Income; Securities Ratings
Short Sales; Portfolio Turnover;
Interest Rate Futures Contracts
and Related Options;
Municipal Leases
Item 14. Management of the Officers and Directors;
Registrant Management;
Custodians
Item 15. Control Persons Capital Stock
and Principal
Holders of Securities
Item 16. Investment Advisory Management;
and Other Services Custodians
Item 17. Brokerage Allocation Brokerage;
Performance Advertising
Item 18. Capital Stock and Capital Stock;
Other Securities Multiple Class Structure
Item 19. Purchase, Redemption N/A
and Pricing of
Securities Being
Offered
Item 20. Tax Status N/A
Item 21. Underwriters N/A
Item 22. Calculation of Yield Performance Advertising
Quotations of Money
Market Funds
Item 23. Financial Statements Financial Statements
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
TWENTIETH
CENTURY(R)
GROUP
Select
Heritage
Growth
Ultra
Vista
INVESTOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP(R) AMERICAN CENTURY GROUP TWENTIETH CENTURY GROUP
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Select o Heritage o Growth
Ultra o Vista
PROSPECTUS
MARCH 1, 1997
Select o Heritage o Growth
Ultra o Vista
INVESTOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Five of the funds from our
Twentieth Century Group that invest primarily in equity securities are described
in this Prospectus. Their investment objectives are listed on page 2 of this
Prospectus. The other funds are described in separate prospectuses.
Through its Investor Class of shares, American Century offers investors a
full line of no-load funds, investments that have no sales charges or
commissions.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY - TWENTIETH CENTURY
SELECT FUND
AMERICAN CENTURY - TWENTIETH CENTURY
HERITAGE FUND
The Select and Heritage funds seek capital growth. The funds intend to
pursue their investment objectives by investing primarily in common stocks of
companies that are considered by management to have better-than-average
prospects for appreciation. As a matter of fundamental policy, 80% of the assets
of Select and Heritage must be invested in securities of companies that have a
record of paying dividends or have committed themselves to the payment of
regular dividends, or otherwise produce income.
AMERICAN CENTURY - TWENTIETH CENTURY
GROWTH FUND
AMERICAN CENTURY - TWENTIETH CENTURY
ULTRA FUND
AMERICAN CENTURY - TWENTIETH CENTURY
VISTA FUND
The Growth, Ultra and Vista funds seek capital growth. The funds intend to
pursue their investment objectives by investing primarily in common stocks that
are considered by management to have better-than-average prospects for
appreciation.
There is no assurance that the funds will achieve their respective
investment objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds ...................................2
Transaction and Operating Expense Table ..............................4
Financial Highlights .................................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds ....................................10
Growth Equity Funds ..............................................10
Select and Heritage ..............................................10
Growth, Ultra and Vista ..........................................10
Other Investment Practices, Their Characteristics
and Risks ........................................................11
Foreign Securities ...............................................11
Forward Currency Exchange Contracts ..............................11
Portfolio Turnover ...............................................12
Repurchase Agreements ............................................12
Derivative Securities ............................................13
Portfolio Lending ................................................13
When-Issued Securities ...........................................14
Rule 144A Securities .............................................14
Short Sales ......................................................14
Performance Advertising .............................................14
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments ........................................16
Investing in American Century .......................................16
How to Open an Account ..............................................16
By Mail ........................................................16
By Wire ........................................................16
By Exchange ....................................................17
In Person ......................................................17
Subsequent Investments ...........................................17
By Mail ........................................................17
By Telephone ...................................................17
By Online Access ...............................................17
By Wire ........................................................17
In Person ......................................................17
Automatic Investment Plan ........................................17
How to Exchange from One Account to Another .........................17
By Mail ........................................................18
By Telephone ...................................................18
By Online Access ...............................................18
How to Redeem Shares ................................................18
By Mail ........................................................18
By Telephone ...................................................18
By Check-A-Month ...............................................18
Other Automatic Redemptions ....................................18
Redemption Proceeds ..............................................18
By Check .......................................................18
By Wire and ACH ................................................19
Special Requirements for Large Redemptions .......................19
Redemption of Shares in Low-Balance Accounts .....................19
Signature Guarantee .................................................19
Special Shareholder Services ........................................20
Automated Information Line .....................................20
Online Account Access ..........................................20
Open Order Service .............................................20
Tax-Qualified Retirement Plans .................................20
Important Policies Regarding Your Investments .......................20
Reports to Shareholders .............................................21
Employer-Sponsored Retirement Plans and
Institutional Accounts ...........................................22
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................................23
When Share Price Is Determined ...................................23
How Share Price Is Determined ....................................23
Where to Find Information About Share Price ......................24
Distributions .......................................................24
Taxes ...............................................................24
Tax-Deferred Accounts ............................................24
Taxable Accounts .................................................25
Management ..........................................................26
Investment Management ............................................26
Code of Ethics ...................................................27
Transfer and Administrative Services .............................27
Distribution of Fund Shares .........................................28
Further Information About American Century ..........................28
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Select, Heritage,
Growth, Ultra, Vista
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C>
Maximum Sales Load Imposed on Purchases ........................... none
Maximum Sales Load Imposed on Reinvested Dividends ................ none
Deferred Sales Load ............................................... none
Redemption Fee(1) ................................................. none
Exchange Fee ...................................................... none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees ................................................... 1.00%
12b-1 Fees ........................................................ none
Other Expenses(2) ................................................. 0.00%
Total Fund Operating Expenses ..................................... 1.00%
EXAMPLE
You would pay the following expenses on a 1 year $ 10
$1,000 investment, assuming a 5% annual return and 3 years 32
redemption at the end of each time period: 5 years 55
10 years 122
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) Other expenses, which includes the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year.
</TABLE>
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the funds offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The funds offer
three other classes of shares, primarily to institutional investors, that have
different fee structures than the Investor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class. A
difference in fees will result in different performance for the other classes.
For additional information about the various classes, see "Further Information
About American Century," page 28.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SELECT
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ........................ $39.52 $37.67 $45.76 $39.18 $40.79 $34.19 $35.98 $27.85 $32.69 $35.40
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income ................. .20(1) .33(1) .40 .46 .53 .63 .62 1.10 .64 .33
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 6.73 4.68 (3.59) 7.94 .34 8.17 (1.29) 7.74 1.37 .80
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From
Investment Operations ................. 6.93 5.01 (3.19) 8.40 .87 8.80 (.67) 8.84 2.01 1.13
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ (.27) (.281) (.432) (.495) (.653) (.652) (1.116) (.707) (.481) (.380)
From Net Realized Gains on
Investment Transactions ............... (4.66) (2.750) (4.466) (1.313) (1.823) (1.551) -- -- (6.367) (3.462)
In Excess of Net Realized Gains ....... -- (.125) -- (.016) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (4.93) (3.156) (4.898) (1.824) (2.476) (2.203) (1.116) (.707) (6.848) (3.842)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $41.52 $39.52 $37.67 $45.76 $39.18 $40.79 $34.19 $35.98 $27.85 $32.69
======= ====== ====== ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 19.76% 15.02% (7.37)% 22.20% 1.76% 27.05% (2.03)% 32.59% 7.31% 3.47%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
to Average Net Assets ................. .5% .9% 1.0% 1.1% 1.4% 1.7% 1.8% 3.4% 2.2% 1.1%
Portfolio Turnover Rate ............... 105% 106% 126% 82% 95% 84% 83% 93% 140% 123%
Average Commission Paid per
Investment Security Traded ............ $.041 $.046 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $4,039 $4,008 $4,278 $5,160 $4,534 $4,163 $2,953 $2,721 $2,367 $2,417
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
HERITAGE
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ....................... $11.75 $10.32 $11.03 $9.30 $8.59 $6.55 $8.15 $6.21 $5.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income .................. --(2) .05(2) .07 .07 .10 .11 .10 .08 .06
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ...... 1.15 1.96 (.21) 2.43 .72 2.04 (.94) 1.93 1.16
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ....... 1.15 2.01 (.14) 2.50 .82 2.15 (.84) 2.01 1.22
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............. (.05) (.033) (.068) (.093) (.113) (.110) (.065) (.066) (.013)
From Net Realized Gains on
Investment Transactions ................ (.61) (.514) (.500) (.679) -- -- (.691) -- --
In Excess of Net Realized Gains ........ -- (.030) (.006) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions .................... (.66) (.577) (.574) (.772) (.113) (.110) (.756) (.066) (.013)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............ $12.24 $11.75 $10.32 $11.03 $9.30 $8.59 $6.55 $8.15 $6.21
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3) ........................ 10.44% 21.04% (1.13)% 28.64% 9.65% 33.25% (11.62)% 32.65% 25.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. .99% .99% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net Investment Income
to Average Net Assets .................. -- .5% .7% .7% 1.1% 1.5% 1.6% 1.3% 1.4%(4)
Portfolio Turnover Rate ................ 122% 121% 136% 116% 119% 146% 127% 159% 130%(4)
Average Commission Paid per
Investment Security Traded ............. $.042 $.042 --(5) --(5) --(5) --(5) --(5) --(5) --(5)
Net Assets, End
of Period (in millions) ................ $1,083 $1,008 $897 $702 $369 $269 $199 $117 $55
(1) November 10, 1987 (inception) through October 31, 1988
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total return for periods less than one year are not
annualized.
(4) Annualized.
(5) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
6 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
GROWTH
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ........................ $23.88 $22.99 $25.27 $23.64 $22.32 $14.81 $17.44 $12.54 $15.62 $19.47
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) .......... (.01)(1) .08(1) .06 .06 (.02) .04 .09 .08 .30 .01
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 1.47 4.08 .48 1.94 1.35 8.47 (2.05) 5.14 .13 1.30
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 1.46 4.16 .54 2.00 1.33 8.51 (1.96) 5.22 .43 1.31
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ (.07) (.051) (.056) -- (.013) (.111) (.079) (.320) (.046) (.086)
From Net Realized Gains
on Investment Transactions ............ (2.98) (3.183) (2.764) (.353) -- (.891) (.592) -- (3.460) (5.076)
In Excess of Net Realized Gains ....... (.08) (.040) (.002) (.013) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (3.13) (3.274) (2.822) (.366) (.013) (1.002) (.671) (.320) (3.506) (5.162)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $22.21 $23.88 $22.99 $25.27 $23.64 $22.32 $14.81 $17.44 $12.54 $15.62
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 8.18% 22.31% 2.66% 8.48% 5.96% 60.64% (11.72)% 42.74% 3.18% 9.32%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.1)% .4% .3% .2% (.1)% .2% .6% .5% 2.4% .2%
Portfolio Turnover Rate ............... 122% 141% 100% 94% 53% 69% 118% 98% 143% 114%
Average Commission Paid per
Investment Security Traded ............ $.0360 $.040 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $4,765 $5,130 $4,363 $4,641 $4,472 $3,193 $1,697 $1,597 $1,229 $1,188
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 7
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ULTRA
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ........................ $28.03 $21.16 $21.61 $15.46 $15.53 $7.73 $9.63 $6.86 $8.76 $9.06
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) ......... (.05)(1) (.07)(1) (.03) (.09) (.05) (.03) (.03) .19 (.02) (.07)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 2.84 7.58 (.42) 6.24 (.02) 7.86 (.73) 2.58 1.38 (.22)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 2.79 7.51 (.45) 6.15 (.07) 7.83 (.76) 2.77 1.36 (.29)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ -- -- -- -- -- -- (.196) -- -- (.007)
From Net Realized Gains on
Investment Transactions ............... (1.19) (.645) -- -- -- (.028) (.947) -- (3.258) --
In Excess of Net Realized Gains ....... (.11) -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (1.30) (.645) -- -- -- (.028) (1.143) -- (3.258) (.007)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $29.52 $28.03 $21.16 $21.61 $15.46 $15.53 $7.73 $9.63 $6.86 $8.76
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 10.79% 36.89% (2.08)% 39.78% (.45)% 101.51% (9.02)% 40.37% 19.52% (3.23)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.2)% (.3)% (.1)% (.6)% (.4)% (.5)% (.3)% 2.2% (.3)% (.5)%
Portfolio Turnover Rate ............... 87% 87% 78% 53% 59% 42% 141% 132% 140% 137%
Average Commission Paid per
Investment Security Traded ............ $.0350 $.033 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $18,266 $14,376 $10,344 $8,037 $4,275 $2,148 $330 $347 $258 $236
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
8 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
VISTA
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ........................ $15.73 $10.94 $12.24 $11.01 $10.53 $6.28 $8.74 $5.91 $5.73 $6.88
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) .......... (.11)(1) (.08)(1) (.08) (.07) (.04) (.02) (.01) (.03) .01 (.05)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 1.09 4.90 .45 1.95 .52 4.27 (1.76) 2.87 .63 (.45)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... .98 4.82 .37 1.88 .48 4.25 (1.77) 2.84 .64 (.50)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ -- -- -- -- -- -- -- (.012) -- --
From Net Realized Gains
on Investment Transactions ............ (1.02) (.030) (1.663) (.641) -- -- (.693) -- (.462) (.651)
In Excess of Net Realized Gains ....... (.01) -- (.012) (.006) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (1.03) (.030) (1.675) (.647) -- -- (.693) (.012) (.462) (.651)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $15.68 $15.73 $10.94 $12.24 $11.01 $10.53 $6.28 $8.74 $5.91 $5.73
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 6.96% 44.20% 4.16% 17.71% 4.55% 67.67% (22.17)% 48.19% 11.41% (7.70)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. .99% .98% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.7)% (.6)% (.8)% (.6)% (.4)% (.3)% (.1)% (.4)% .2% (.7)%
Portfolio Turnover Rate ............... 91% 89% 111% 133% 87% 92% 103% 125% 145% 123%
Average Commission Paid per
Investment Security Traded ............ $.028 $.033 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $2,276 $1,676 $792 $847 $830 $622 $341 $264 $206 $187
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 9
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
GROWTH EQUITY FUNDS
All of the funds offered by this Prospectus seek capital growth by
investing in securities, primarily common stocks, that meet certain fundamental
and technical standards of selection (relating primarily to earnings and
revenues acceleration) and have, in the opinion of the funds' manager,
better-than-average potential for appreciation. So long as a sufficient number
of such securities are available, the manager intends to keep the funds fully
invested in these securities regardless of the movement of stock prices
generally. In most circumstances, the funds' actual level of cash and cash
equivalents will fluctuate between 0% and 10% of total assets with 90% to 100%
of their assets committed to equity and equity equivalent investments. The funds
may purchase securities only of companies that have a record of at least three
years of continuous operation.
SELECT AND HERITAGE
Securities of companies chosen for the Select and Heritage funds are chosen
primarily for their growth potential. Additionally, as a matter of fundamental
policy, 80% of the assets of Select and Heritage must be invested in securities
of companies that have a record of paying dividends, or have committed
themselves to the payment of regular dividends, or otherwise produce income. The
remaining 20% of fund assets may be invested in any otherwise permissible
securities that the manager believes will contribute to the funds' stated
investment objectives. The income payments of equity securities are only a
secondary consideration; therefore, the income return that Select and Heritage
provide may not be significant. Otherwise, Select and Heritage follow the same
investment techniques described below for Growth, Ultra and Vista.
Since Select is one of our larger funds and Heritage is substantially
smaller, Select will invest in shares of larger companies with larger share
trading volume, and Heritage will tend to invest in smaller companies with
smaller share trading volume. However, the two funds are not mutually exclusive,
and a given security may be owned by both funds. For the reasons stated in the
next section, it should be expected that Heritage will be more volatile and
subject to greater short-term risk and long-term opportunity than Select.
Because of its size, and because it invests primarily in securities that
pay dividends or are committed to the payment of dividends, Select may be
expected to be the least volatile of the funds described in this Prospectus.
GROWTH, ULTRA AND VISTA
Management selects for the portfolios of the Growth, Ultra and Vista funds,
securities of companies whose earnings and revenue trends meet management's
standards of selection.
Growth generally invests in large, established companies. Ultra generally
invests in medium to large size companies, while Vista invests in medium-sized
and smaller companies. As of February 1, 1997, the size of the companies (as
reflected by their capitalizations) held by the funds was as follows:
10 Information Regarding the Funds American Century Investments
Median Capitalization
of Companies Held
- ------------------------------------------------------------------------
Growth $11,638,755,000
Ultra $10,795,469,000
Vista $1,069,608,000
- ------------------------------------------------------------------------
The median capitalization of the companies in a given fund may change over
time. In addition, the criteria outlined previously are not mutually exclusive,
and a given security may be owned by more than one of the funds.
The size of companies in which a fund invests tends to give each fund its
own characteristics of volatility and risk. These differences come about because
developments such as new or improved products or methods, which would be
relatively insignificant to a large company, may have a substantial impact on
the earnings and revenues of a small company and create a greater demand and a
higher value for its shares. However, a new product failure, which could readily
be absorbed by a large company, can cause a rapid decline in the value of the
shares of a smaller company. Hence, it could be expected that funds investing in
smaller companies would be more volatile than funds investing in larger
companies.
OTHER INVESTMENT PRACTICES,
THEIR CHARACTERISTICS AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
Each of the funds may invest an unlimited amount of its assets in the
securities of foreign issuers, primarily from developed markets, when these
securities meet its standards of selection. The funds may make such investments
either directly in foreign securities, or by purchasing Depositary Receipts
("DRs") for foreign securities. DRs are securities listed on exchanges or quoted
in the over-the-counter market in one country but represent the shares of
issuers domiciled in other countries. DRs may be sponsored or unsponsored.
Direct investments in foreign securities may be made either on foreign
securities exchanges or in the over-the-counter markets.
Subject to their individual investment objectives and policies, the funds
may invest in common stocks, convertible securities, preferred stocks, bonds,
notes and other debt securities of foreign issuers, and debt securities of
foreign governments and their agencies. The funds will limit their purchase of
debt securities to investment grade obligations.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the funds may be denominated in
foreign currencies. Other securities, such as DRs, may be denominated in U.S.
dollars, but have a value that is dependent on the performance of a foreign
security, as valued in the currency of its home country. As a result, the value
of a fund's portfolio may be affected by changes in the exchange rates between
foreign currencies and the U.S. dollar, as well as by changes in the market
values of the securities themselves. The performance of foreign currencies
relative to the U.S. dollar may be a factor in the overall performance of a
fund.
To protect against adverse movements in exchange rates between currencies,
the funds may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
A fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, a
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
Prospectus Information Regarding the Funds 11
hedging." Each fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, a fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." A fund may not enter into a
portfolio hedging transaction where it would be obligated to deliver an amount
of foreign currency in excess of the aggregate value of its portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
Each fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that a fund will enter
into portfolio hedges much less frequently than transaction hedges.
If a fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of a fund's
assets will be committed to a segregated account in connection with portfolio
hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect a fund against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The total portfolio turnover rates of the funds are shown in the Financial
Highlights tables on pages 5-9 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives. The
manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise committed
to the purchase of securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities
12 Information Regarding the Funds American Century Investments
dealers who are deemed creditworthy pursuant to criteria adopted by the funds'
Board of Directors.
No fund will invest more than 15% of its assets in repurchase agreements
maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market. Interest on
loaned securities may not exceed 10% of the annual gross income of the fund
(without offset for realized capital gains). The portfolio lending policy
described
Prospectus Information Regarding the Funds 13
in this paragraph is a fundamental policy that may be changed only by a vote of
a majority of fund shareholders.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time the commitment to purchase is
made. Delivery of and payment for these securities typically occur 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
when-issued security. Accordingly, the value of such security may decline prior
to delivery, which could result in a loss to the fund. A separate account for
each fund consisting of cash or high-quality liquid debt securities in an amount
at least equal to the when-issued commitments will be established and maintained
with the custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the board of directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A security
that is illiquid. In such an event, the funds' manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
SHORT SALES
Each fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow a fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns at
a current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code and
Regulations.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, and yield.
Performance data may be quoted separately for the Investor Class and for the
other classes.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual
14 Information Regarding the Funds American Century Investments
compound return over a stated period of time that would have produced the fund's
cumulative total return over the same period if the fund's performance had
remained constant throughout.
A quotation of yield reflects a fund's income over a stated period of time
expressed as a percentage of the fund's share price.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on its shares or the income reported
in the fund's financial statements.
The funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or Donoghue's Money Fund Report) and publications
that monitor the performance of mutual funds. Performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
In addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Funds 15
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 22.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 [$1,000 for IRA and Uniform
Gifts/Transfers to Minors Acts ("UGMA/UTMA") accounts]. These minimums will be
waived if you establish an automatic investment plan to your account that is the
equivalent of at least $50 per month. See "Automatic Investment Plan," page 17.
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
16 How to Invest with American Century Investments American Century Investments
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 16 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your fund shares to our other funds up to six times per year per account. An
exchange request will be processed as of the same day it is received, if it is
received before the funds' net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for funds issued by the
American Century Target Maturities Trust, and at the close of the Exchange for
all of our other funds. See "When Share Price is Determined," page 23.
Prospectus How to Invest with American Century Investments 17
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
If, in any 90-day period, the total of your exchanges and your redemptions
from any one account exceeds the lesser of $250,000 or 1% of the fund's assets,
further exchanges will be subject to special requirements to comply with our
policy on large redemptions. See "Special Requirements for Large Redemptions,"
page 19.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line--see page 20) if you have
authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received. For large redemptions, please read "Special Requirements for Large
Redemptions," on page 19.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 19.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with a check in an amount you choose (minimum
$50). To set up a Check-A-Month plan, please call and request our Check-A-Month
brochure.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds to you or to your
account at a bank or other financial institution. To set up automatic
redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
18 How to Invest with American Century Investments American Century Investments
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule 18f-1 under the Investment Company
Act, which obligates each fund make certain redemptions in cash. This
requirement to pay redemptions in cash applies to situations where one
shareholder redeems, during any 90-day period, up to the lesser of $250,000 or
1% of the assets of the fund. Although redemptions in excess of this limitation
will also normally be paid in cash, we reserve the right under unusual
circumstances to honor these redemptions by making payment in whole or in part
in readily marketable securities (a "redemption-in-kind").
If payment is made in securities, the securities will be selected by the
fund, will be valued in the same manner as they are in computing the fund's net
asset value and will be provided without prior notice.
If your redemption would exceed this limit and you would like to avoid
being paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
Despite the funds' right to redeem fund shares through a
redemption-in-kind, we do not expect to exercise this option unless a fund has
an unusually low level of cash to meet redemptions and/or is experiencing
unusually strong demands for its cash. Such a demand might be caused, for
example, by extreme market conditions that result in an abnormally high level of
redemption requests concentrated in a short period of time. Absent these or
similar circumstances, we expect redemptions in excess of $250,000 to be paid in
cash in any fund with assets of more than $50 million if total redemptions from
any one account in any 90-day period do not exceed one-half of 1% of the total
assets of the fund.
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you to either bring the value
of the shares held in the account up to the minimum or to establish an automatic
investment that is the equivalent of at least $50 per month. If action is not
taken within 90 days of the letter's date, the shares held in the account will
be redeemed and the proceeds from the redemption will be sent by check to your
address of record. We reserve the right to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee is required
when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
Prospectus How to Invest with American Century Investments 19
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week, at
www.americancentury.com to access your fund's daily share price, receive updates
on major market indices and view historical performance of your fund. If you
select "Full Services" on your application, you can use your personal access
code and Social Security number to view your account balance and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
Each fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts (IRAs);
o 403(b)plans for employees of public school systems and non-profit
organizations; or
o Profit sharing plans and pension plans for corporations and other
employers.
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
20 How to Invest with American Century Investments erican Century Investments
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Prospectus How to Invest with American Century Investments 21
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT
PLANS AND INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
22 How to Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents before the time as of which the net
asset value of the fund is determined, are effective on, and will receive the
price determined, that day. Investment, redemption and exchange requests
received thereafter are effective on, and receive the price determined as of,
the close of the Exchange on the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the funds' procedures or any contractual arrangements with the
funds or the funds' distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Prospectus Additional Information You Should Know 23
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds are published in
leading newspapers daily. The net asset value may also be obtained by calling us
or by accessing our Web site (www.americancentury.com).
DISTRIBUTIONS
In general, distributions from net investment income and net realized
securities gains, if any, are declared and paid once a year, but the funds may
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act. Distributions from investment
income and from net profits realized on the sale of securities, if any, will be
declared annually on or before December 31.
THE OBJECTIVE OF THESE FUNDS IS CAPITAL APPRECIATION AND NOT THE PRODUCTION
OF DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE
OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE.
Participants in employer-sponsored retirement or savings plan must reinvest
all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
fund expenses.
Because such gains and dividends are included in the value of your shares,
when they are distributed the value of your shares is reduced by the amount of
the distribution. If you buy your shares through a taxable account just before
the distribution, you will pay the full price for your shares, and then receive
a portion of the purchase price back as a taxable distribution.
See "Taxes," this page.
TAXES
Each fund has elected to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders, it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description,
24 Additional Information You Should Know American Century Investments
or a professional tax advisor regarding the tax consequences of participation in
the plan, contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless of the length of time you have held the
shares on which such distributions are paid. However, you should note that any
loss realized upon the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of any distribution of
long-term capital gain to you with respect to such shares.
Dividends and interest received by a fund on foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Foreign countries generally do not impose taxes on capital
gains in respect of investments by non-resident investors. The foreign taxes
paid by a fund will reduce its dividends.
If more than 50% of the value of a fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by you.
If a fund purchases the securities of certain foreign investment funds or
trusts called passive foreign investment companies, capital gains on the sale of
such holdings will be deemed to be ordinary income regardless of how long the
fund holds its investment. The fund may also be subject to corporate income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed, and is not refundable.
Prospectus Additional Information You Should Know 25
Redemption of shares of a fund (including redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolios of each fund
and directs the purchase and sale of its investment securities. It utilizes
teams of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The teams meet regularly to review
portfolio holdings and to discuss purchase and sale activity. The teams adjust
holdings in the funds' portfolios as they deem appropriate in pursuit of the
funds' investment objectives. Individual portfolio manager members of the team
may also adjust portfolio holdings of the funds as necessary between team
meetings.
The portfolio manager members of the teams managing the funds described in
this Prospectus and their work experience for the last five years are as
follows:
JAMES E. STOWERS III, President and Portfolio Manager, joined American
Century in 1981. He is a member of the teams that manage Growth and Ultra.
CHARLES M. DUBOC, Senior Vice President and Portfolio Manager, joined
American Century in August 1985, and served as Fixed Income Portfolio Manager
from that time until April 1993. In April 1993, Mr. Duboc joined American
Century's equity investment efforts. He is a member of the team that manages
Select.
GLENN A. FOGLE, Vice President and Portfolio Manager, joined American
Century in September 1990 as an Investment Analyst, a position he held until
March 1993. At that time he was promoted to Portfolio Manager. He is a member of
the team that manages Vista.
NANCY B. PRIAL, Vice President and Portfolio Manager, joined American
Century in February 1994 as a Portfolio Manager. For more than four years prior
to joining American Century, Ms. Prial served as Senior Vice President and
Portfolio Manager at Frontier Capital Management Company, Boston, Massachusetts.
She is a member of the team that manages Heritage.
KEVIN M. LEWIS, Portfolio Manager, joined American Century in October
1995. Prior to that he served as a Portfolio Manager for Virtus Capital
Management, Richmond, Virginia, from January 1995 to October 1995. Prior to
that, he was a Portfolio Manager for Signet Trust Company, Richmond, Virginia.
Mr. Lewis is a member of the team that manages Heritage.
26 Additional Information You Should Know American Century Investments
JOHN D. SEITZER, Portfolio Manager, joined American Century in June 1993
as an Investment Analyst, a position he held until July 1996. At that time he
was promoted to Portfolio Manager. Prior to joining American Century, Mr.
Seitzer attended Indiana University from August 1991 to June 1993, where he
obtained his MBA degree. Mr. Seitzer is a member of the team that manages
Vista.
BRUCE A. WIMBERLY, Portfolio Manager, joined American Century in
September 1994 as an Investment Analyst, a position he held until July 1996.
At that time he was promoted to Portfolio Manager. Prior to joining American
Century, Mr. Wimberly attended Kellogg Graduate School of Management,
Northwestern University from August 1992 to August 1994, where he obtained his
MBA degree. Prior to that he served as a Research Analyst for Frontier Capital
Management Company, Boston, Massachusetts. Mr. Wimberly is a member of the
team that manages Ultra.
JEAN LEDFORD, Vice President and Portfolio Manager, joined American Century
in January 1997 as a Portfolio Manager. Prior to joining American Century, Ms.
Ledford worked for the State of Wisconsin Investment Board as an Investment
Director from 1994 to 1996 and as an Assistant Investment Director from 1983 to
1994. Ms. Ledford is a member of the team that manages Select.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the Investor Class of the funds, the manager
receives an annual fee of 1% of the average net assets.
On the first business day of each month, each series of shares pays a
management fee to the manager for the previous month at the rate specified. The
fee for the previous month is calculated by multiplying the applicable fee for
such series by the aggregate average daily closing value of the series' net
assets during the previous month, and further multiplying that product by a
fraction, the numerator of which is the number of days in the previous month and
the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides facilities, equipment and personnel to the funds, and is paid for
such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs. The manager
or an affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the funds, transactions in
shares of the funds may be executed by brokers or investment advisors who charge
a transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the funds or the
manager. You should be aware of the fact that these transactions may be made
directly with American Century without incurring such fees.
Prospectus Additional Information You Should Know 27
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
funds' investment manager. The manager pays all expenses for promoting and
distributing the Investor Class of fund shares offered by this Prospectus. The
Investor Class of shares does not pay any commissions or other fees to the
Distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-2021
(international calls: 816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value
shares. Each series is commonly referred to as a fund. The assets belonging to
each series of shares are held separately by the custodian.
American Century offers four classes of each of the funds offered by this
Prospectus: an Investor Class, an Institutional Class, a Service Class, and an
Advisor Class. The shares offered by this Prospectus are Investor Class shares
and have no up-front charges, commissions, or 12b-1 fees.
The other classes of shares are primarily offered to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Investor Class.
The difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the other classes of shares not offered by
this Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of another class of the
same fund.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters which must be voted on separately by the series or class of
shares affected. Matters affecting
28 Additional Information You Should Know American Century Investments
only one series or class are voted upon only by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the funds to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 29
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[americn century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7804 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
TWENTIETH
CENTURY(R)
GROUP
Giftrust
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP(R) AMERICAN CENTURY GROUP TWENTIETH CENTURY GROUP
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Giftrust
PROSPECTUS
MARCH 1, 1997
Giftrust
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. One of the funds from our
Twentieth Century Group that invests primarily in equity securities is described
in this Prospectus. Its investment objective is listed on page 2 of this
Prospectus. The other funds are described in separate prospectuses.
Giftrust is a unique way to give a gift to a child, grandchild or other
individual. You may not invest in the fund. Rather, your gift, which is
irrevocable, will be invested in the fund by the Giftrust Trustee in accordance
with a trust established under a "Giftrust Agreement." The minimum initial gift
requirement for Giftrust is $500.
This Prospectus gives you information about Giftrust that you should know
before making an investment decision. Please read this Prospectus carefully and
retain it for future reference. Additional information is included in the
Statement of Additional Information dated March 1, 1997, and filed with the
Securities and Exchange Commission. It is incorporated into this Prospectus by
reference. To obtain a copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY - TWENTIETH CENTURY GIFTRUST
Giftrust seeks capital growth. It pursues its investment objective by
investing primarily in common stocks that are considered by management to have
better-than-average prospects for appreciation.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR FOR THE FUND, AND YOU SHOULD NOT RELY ON ANY
OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund .....................................2
Transaction and Operating Expense Table ..............................4
Financial Highlights .................................................5
INFORMATION REGARDING THE FUND
A Unique Gift ........................................................6
Investment Policies of the Fund ......................................6
Investment Approach ...............................................6
Other Investment Practices, Their Characteristics and Risks ..........7
Foreign Securities ................................................7
Forward Currency Exchange Contracts ...............................7
Portfolio Turnover ................................................8
Repurchase Agreements .............................................8
Derivative Securities .............................................8
Portfolio Lending .................................................9
When-Issued Securities ............................................9
Rule 144A Securities ..............................................9
Short Sales ......................................................10
Performance Advertising .............................................10
HOW TO ESTABLISH A GIFTRUST ACCOUNT
American Century Investments ........................................11
Purchase of Fund Shares .............................................11
By Mail ........................................................11
By Telephone ...................................................11
By Wire ........................................................11
Automatic Investments ..........................................11
Additional Information About Gifts .............................12
Special Shareholder Services ........................................12
Online Account Access ..........................................12
Exchange of Fund Shares .............................................12
How to Redeem Shares ................................................12
By Mail ........................................................12
By Telephone ...................................................13
By Check-A-Month ...............................................13
Signature Guarantee ..............................................13
Redemption Proceeds .................................................13
By Mail ........................................................13
By Wire and ACH ................................................13
Additional Information About Redemptions .........................14
Telephone Services ..................................................14
Investors Line ...................................................14
Automated Information Line .......................................14
How to Change the Address of Record .................................14
Reports to Shareholders .............................................14
Form 1099-DIV ..................................................15
Form 1099-B ....................................................15
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................................16
When Share Price Is Determined ...................................16
How Share Price Is Determined ....................................16
Where to Find Information About Share Price ......................17
Distributions .......................................................17
Taxes ...............................................................17
Management ..........................................................18
Investment Management ............................................18
Code of Ethics ...................................................19
Transfer and Administrative Services .............................19
Distribution of Fund Shares ......................................19
Further Information About American Century ..........................19
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Giftrust
SHAREHOLDER TRANSACTION EXPENSES(1):
<S> <C>
Maximum Sales Load Imposed on Purchases ........................................................ none
Maximum Sales Load Imposed on Reinvested Dividends ............................................. none
Deferred Sales Load ............................................................................ none
Redemption Fee(2) .............................................................................. none
Exchange Fee ................................................................................... none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees ................................................................................ 1.00%
12b-1 Fees ..................................................................................... none
Other Expenses(3) .............................................................................. 0.00%
Total Fund Operating Expenses .................................................................. 1.00%
EXAMPLE
A $1,000 investment in Giftrust would bear the expenses set forth to the 1 year $ 10
right, assuming a 5% annual return and redemption at the end of each time period. 3 years 32
It should be noted that, in most instances, a gift made in the fund must be made in 5 years 55
trust for a minimum term of ten years: 10 years 122
(1) A $100 administrative fee will be charged against each Giftrust account
established after March 31, 1996 to help cover the costs incurred as a
result of the Giftrust reaching maturity. See "Investment Policies of the
Fund," page 6.
(2) Redemption proceeds sent by wire are subject to a $10 processing fee.
(3) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year. Also, a $10 fee will be charged
against each Giftrust account for which an annual tax return is filed. See
"Taxes," page 17.
</TABLE>
The purpose of the table is to help you understand the various costs and
expenses that an investment in the fund will bear directly or indirectly. The
example set forth above assumes reinvestment of all dividends and distributions
and uses a 5% annual rate of return as required by Securities and Exchange
Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
GIFTRUST
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The semiannual and
annual reports contain additional performance information and will be made
available upon request and without charge. The information presented is for a
share outstanding throughout the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $25.63 $20.50 $19.23 $13.57 $12.94 $7.25 $9.94 $6.84 $6.67 $8.19
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment (Loss) (.20)(1)(.16)(1) (.10) (.09) (.08) (.06) (.05) (.04) (.01) (.04)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions 2.46 6.37 3.28 7.18 1.41 5.77 (1.72) 3.35 1.04 (.23)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations 2.26 6.21 3.18 7.09 1.33 5.71 (1.77) 3.31 1.03 (.27)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Realized Gains on
Investment Transactions (2.10) (1.085) (1.911) (1.425) (.697) (.025) (.924) (.206) (.856) (1.250)
In Excess of Net Realized Gains -- -- -- (.007) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions (2.10) (1.085) (1.911) (1.432) (.697) (.025) (.924) (.206) (.856) (1.250)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year $25.79 $25.63 $20.50 $19.23 $13.57 $12.94 $7.25 $9.94 $6.84 $6.67
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return(2) 9.72% 32.52% 18.75% 55.84% 10.32% 79.04% (19.77%) 49.81% 16.28% (4.00%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .98% .98% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment (Loss) to
Average Net Assets (.8%) (.7%) (.7%) (.7%) (.7%) (.6%) (.6%) (.5%) (.1%) (.5%)
Portfolio Turnover Rate 121% 105% 115% 143% 134% 143% 137% 160% 157% 130%
Average Commission Paid per
Investment Security Traded $.023 $.026 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) $866 $561 $266 $154 $78 $55 $25 $23 $13 $10
(1) Computed using average shares outstanding for the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
A UNIQUE GIFT
A Giftrust is a unique way to give a gift to a child or any individual. You
cannot establish or make investments in a Giftrust for yourself or your spouse,
nor can a Giftrust be established that designates anyone other than an
individual (such as a corporation, partnership or other profit or nonprofit
organization) as a beneficiary. The minimum initial gift in Giftrust is $500.
The shares in a Giftrust are held in trust by an independent trustee until
the maturity date you specify. The duration of the trust may be as long as you
wish, but must be at least 10 years from the time you make the first gift in the
Giftrust or until the recipient reaches the age of majority, whichever is later.
The recipient will then receive the shares in the account. The Giftrust is
irrevocable. Before the maturity date you specify, neither you nor the
beneficiary may amend the terms of the trust in any way.
After the maturity of the Giftrust, the beneficiary may continue to own the
Giftrust shares but, except for reinvestment of distributions, may not make
additional Giftrust investments.
Each Giftrust account for which a tax return is filed will be charged a $10
fee to help off-set a portion of the cost of preparing such return. See "Taxes,"
page 17. Additionally, each maturing Giftrust account established after March
31, 1996 will be charged a $100 administrative fee to help cover the costs
incurred by the Trustee as a result of the Giftrust reaching maturity.
The tax laws applicable to trusts in general are quite complex. You should
consider consulting your tax advisor or attorney before opening a Giftrust
account. For information on Giftrusts and taxes, see "Taxes," page 17.
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
INVESTMENT APPROACH
Giftrust seeks capital growth by investing in securities, primarily common
stocks, that meet certain fundamental and technical standards of selection
(relating primarily to earnings and revenues acceleration) and have, in the
opinion of the fund's manager, better-than-average potential for appreciation.
So long as a sufficient number of such securities are available, the fund
intends to stay fully invested in these securities regardless of the movement of
stock prices generally. In most circumstances, the fund's actual level of cash
and cash equivalents will fluctuate between 0% and 10% of total assets with 90%
to 100% of its assets committed to equity and equity equivalent investments. The
fund may purchase securities only of companies that have a record of at least
three years continuous operation.
The size of companies in which a fund invests tends to give a fund its own
characteristics of volatility and risk. These differences come about because
developments such as new or improved products or methods, which would be
relatively insignificant to a large company, may have a substantial impact on
the earnings and revenues of a small company and create a greater demand and a
higher value for its shares. However, a new product failure which could readily
be absorbed by a large company can cause a rapid decline in the value of the
shares of a smaller company. Hence, it could be expected that Giftrust will be
relatively more volatile than most of our other growth funds since it tends to
invest in smaller companies.
6 Information Regarding the Fund American Century Investments
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities of
foreign issuers, primarily from developed markets, when these securities meet
its standards of selection. The fund may make such investments either directly
in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign
securities. DRs are securities listed on exchanges or quoted in the
over-the-counter market in one country but represent the shares of issuers
domiciled in other countries. DRs may be sponsored or unsponsored. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
The fund may invest in common stocks, convertible securities, preferred
stocks, bonds, notes and other debt securities of foreign issuers, and debt
securities of foreign governments and their agencies. The fund will limit its
purchase of debt securities to investment grade obligations.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the fund may be denominated in
foreign currencies. Other securities, such as DRs, may be denominated in U.S.
dollars, but have a value that is dependent on the performance of a foreign
security, as valued in the currency of its home country. As a result, the value
of the fund's portfolio may be affected by changes in the exchange rates between
foreign currencies and the U.S. dollar, as well as by changes in the market
values of the securities themselves. The performance of foreign currencies
relative to the U.S. dollar may be a factor in the overall performance of the
fund.
To protect against adverse movements in exchange rates between currencies,
the fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where it would be obligated to deliver an amount
of foreign currency in excess of the aggregate value of its portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the fund will enter
into portfolio hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund,
when required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the
Prospectus Information Regarding the Fund 7
fund's commitment. At any given time, no more than 10% of the fund's assets will
be committed to a segregated account in connection with portfolio hedging
transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the fund against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The portfolio turnover rate of the fund is shown in the Financial
Highlights table on page 5 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of the fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by a fund since short-term capital gains
are taxable as ordinary income.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions present
an attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The fund will limit repurchase agreement transactions to securities issued
by the United States government, its agencies and instrumentalities, and will
enter into such transactions with those banks and securities dealers who are
deemed creditworthy pursuant to criteria adopted by the fund's Board of
Directors.
The fund will invest no more than 15% of its assets in repurchase
agreements maturing in more than seven days.
DERIVATIVE SECURITIES
The fund may invest in securities that are commonly referred to as
"derivative" securities. Generally, a derivative is a financial arrangement, the
value of which is based on, or "derived" from, a traditional security, asset, or
market index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
8 Information Regarding the Fund American Century Investments
The fund may not invest in a derivative security unless the reference index
or the instrument to which it relates is an eligible investment for the fund.
For example, a security whose underlying value is linked to the price of oil
would not be a permissible investment since the fund may not invest in oil and
gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market. Interest on
loaned securities may not exceed 10% of the annual gross income of the fund
(without offset for realized capital gains). The portfolio lending policy
described in this paragraph is a fundamental policy that may be changed only by
a vote of fund shareholders.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued
basis without limit when, in the opinion of the manager, such purchases will
further the investment objectives of the fund. The price of when-issued
securities is established at the time commitment to purchase is made. Delivery
of and payment for these securities typically occur 15 to 45 days after the
commitment to purchase. Market rates of interest on debt securities at the time
of delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of such security may decline prior to delivery,
which could result in a loss to the fund. A separate account for the fund
consisting of cash or high-quality liquid debt securities in an amount at least
equal to the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the
Prospectus Information Regarding the Fund 9
Board of Directors to determine, such determination to be based upon a
consideration of the readily available trading markets and the review of any
contractual restrictions. The staff also acknowledges that, while the board
retains ultimate responsibility, it may delegate this function to the manager.
Accordingly, the board has established guidelines and procedures for determining
the liquidity of Rule 144A securities and has delegated the day-to-day function
of determining the liquidity of Rule 144A securities to the manager. The board
retains the responsibility to monitor the implementation of the guidelines and
procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and the fund may, from time to time, hold a Rule 144A
security that is illiquid. In such an event, the fund's manager will consider
appropriate remedies to minimize the effect on the fund's liquidity. The fund
may not invest more than 15% of its assets in illiquid securities (securities
that may not be sold within seven days at approximately the price used in
determining the net asset value of fund shares).
SHORT SALES
The fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns
at a current attractive price, but also wishes to defer recognition of gain or
loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code.
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
The fund may also include in advertisements data comparing performance with
the performance of non-related investment media, published editorial comments
and performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our family, and
that combined or blended performance may be compared to the same indices to
which the fund may be compared.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results.
10 Information Regarding the Fund American Century Investments
HOW TO ESTABLISH A GIFTRUST ACCOUNT
AMERICAN CENTURY INVESTMENTS
Giftrust is a part of the American Century Investments family of mutual
funds. Our family provides a full range of investment opportunities, from the
aggressive equity growth funds in our Twentieth Century Group, to the fixed
income funds in our Benham Group, to the moderate risk and specialty funds in
our American Century Group. Please call 1-800-345-2021 for a brochure or
prospectuses for the other funds in the American Century Investments family.
PURCHASE OF FUND SHARES
The minimum initial gift to a Giftrust account is $500. Subsequent gifts to
purchase additional shares must be in an amount of $250 or more.
Once a Giftrust has matured, no future investments (other than
reinvestments of distributions) may be made. You may make gifts in the following
ways:
BY MAIL
Send your completed Giftrust application and check or money order payable
in U.S. dollars to American Century Investments.
ADDITIONAL GIFTS. When making additional gifts by mail, please enclose your
check with the return remittance portion of the confirmation of your previous
gift, if available. If the investment slip is not available, indicate on your
check or a separate piece of paper your name, address and the beneficiary's name
and account number.
Orders to purchase shares are effective on the day we receive the purchase
check or money order. See "When Share Price is Determined," page 16.
BY TELEPHONE
Once the Giftrust account is open, additional gifts may be made by
telephone. Please call American Century for further details.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested in
each account.
Wired funds are considered received on the day they are deposited in our
account if they are deposited before the close of business on the New York Stock
Exchange, usually 3 p.m. Central time. See "When Share Price Is Determined,"
page 16.
AUTOMATIC INVESTMENTS
Once a Giftrust account is open, you may make additional gifts to the
Giftrust account automatically by authorizing us to draw on your bank account.
You may change the date or amount of your automatic gift anytime by letter
or telephone call to us at least five business days before the change is to
become effective.
Prospectus How To Establish A Giftrust Account 11
ADDITIONAL INFORMATION ABOUT GIFTS
WE CANNOT ACCEPT GIFTS TO A GIFTRUST ACCOUNT SPECIFYING A CERTAIN PRICE,
DATE OR NUMBER OF SHARES AND WILL RETURN THESE REQUESTS.
Once you have mailed or otherwise transmitted your gift instruction to us,
it may not be modified or cancelled.
The fund reserves the right to suspend the offering of shares for a period
of time, and the fund reserves the right to reject any specific gift
instruction. Additionally, gift instructions and requests may be refused if, in
the opinion of the manager, they are of a size that would disrupt the management
of the fund.
SPECIAL SHAREHOLDER SERVICES
As the grantor of a Giftrust, you may establish one or more special
services designed to provide an easy way to do business with us. By electing
these services on your application or by completing the appropriate forms, you
may authorize:
o Investments by phone
o Automatic investments
Once a Giftrust matures, the beneficiary may authorize:
o Exchanges or redemptions by phone
o Redemptions in writing without a signature guarantee
With regard to the service which enables the beneficiary of a matured
Giftrust to exchange and redeem by phone or in writing, and with respect to
redemptions, without a signature guarantee, the fund, its transfer agent and
investment advisor will not be responsible for any loss for instructions that
they reasonably believe are genuine. We intend to employ reasonable procedures
to confirm that instructions received by us, in fact, are genuine. Such
procedures will include requiring personal information to verify the identity of
callers, providing written confirmations of telephone transactions, and
recording telephone calls. If we do not employ reasonable procedures to confirm
the genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week, at
www.americancentury.com to access daily share prices, receive updates on major
market indexes and view historical performance. If you select "Full Services" on
your application, the grantor and beneficiary can use a personal access code and
account number to view account balances and account activity.
EXCHANGE OF FUND SHARES
The beneficiary of a matured Giftrust may exchange his/her shares for
shares of any of the other funds in our family of funds, subject to any
applicable minimum investment requirements of the funds into which the
beneficiary wishes to exchange. Please call 1-800-345-2021 for a prospectus and
additional information about the other funds in our family of funds.
Exchanges from a matured Giftrust account are limited to six times in any
one calendar year. In addition, the shares being exchanged and the shares of
each fund being acquired must have a current value of at least $100 and
otherwise meet the minimum investment requirement, if any, of the fund being
acquired.
No exchanges out of a Giftrust account may be made prior to the maturity of
the Giftrust account.
Exchanges may be requested by telephone or online access (if such services
have been authorized) or by mail. Once an exchange request is mailed or
otherwise transmitted to us, it is irrevocable and may not be modified or
cancelled.
HOW TO REDEEM SHARES
The fund will buy back ("redeem") shares of a matured Giftrust at any time
at the net asset value next determined after receipt of a redemption request
from the beneficiary in good order. Prior to the maturity of a Giftrust,
redemptions are allowed only by the Trustee of the Giftrust, who is authorized
by the Giftrust Agreement to make redemptions for the purpose of paying
applicable fees, expenses and taxes of the Giftrust account.
BY MAIL
The written instructions of a matured Giftrust beneficiary to redeem shares
may be in any one of the following forms:
o A redemption form, available from us
o A letter to us
12 How To Establish A Giftrust Account American Century Investments
Once mailed to us, the redemption request is irrevocable and may not be
modified or cancelled.
If the beneficiary has authorized redemptions without signature guarantees,
no signature guarantee is required. If this special service has not been
elected, signatures must be guaranteed. See "Signature Guarantee," this page.
The signature should be exactly as the name appears in the registration. If
the matured Giftrust's beneficiary's name appears in the registration as Mary
Elizabeth Jones, she should sign that way and not as Mary E. Jones.
Before writing, see "Additional Information About Redemptions," page 14.
BY TELEPHONE
The beneficiary of a matured Giftrust may redeem shares by telephone if
that service has been authorized by the beneficiary. Once made, a telephone
request may not be modified or cancelled.
All calls received before the close of the New York Stock Exchange, usually
3 p.m. Central time, will receive that day's closing price.
Before calling, read "Additional Information About Redemptions," page 14.
BY CHECK-A-MONTH
Our Check-A-Month plan automatically redeems enough shares each month to
provide the beneficiary of a matured Giftrust having an account value of $10,000
or more with a check in an amount the beneficiary chooses (minimum $50).
Interested beneficiaries should call us for our Check-A-Month brochure.
SIGNATURE GUARANTEE
When a signature guarantee is required, the signature must be guaranteed by
a domestic bank or trust company, credit union, broker, dealer, national
securities exchange, registered securities association, clearing agency or
savings association as defined by federal law. The institution providing the
guarantee must use a signature guarantee ink stamp or medallion which states
"Signature(s) Guaranteed" and be signed in the name of the guarantor by an
authorized person with that person's title and the date. We may reject a
signature guarantee if the guarantor is not a member of or participant in a
signature guarantee program.
Shareholders living abroad may acknowledge their signatures before a U.S.
consular officer. Military personnel in foreign countries may acknowledge their
signatures before officers authorized to take acknowledgements (e.g., legal
officers and adjutants).
We may waive the signature guarantee on a redemption of $25,000 or less if
we are able to verify the signature of the beneficiary of a matured Giftrust
from account records. We reserve the right to amend or discontinue this waiver
policy at any time and, with regard to a particular redemption transaction, to
require a signature guarantee at our discretion.
REDEMPTION PROCEEDS
Redemption proceeds may be sent to the beneficiary of a matured Giftrust:
BY MAIL
If a redemption check is mailed, it is usually mailed on the second
business day after receipt of a redemption request, but not later than seven
days afterwards.
Except as noted below, all checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record.
In certain instances a redemption check can be made payable to someone
other than the registered owner of the shares and/or mailed to an address other
than the address of record. Please call us for information about this special
service. See "Telephone Services," page 14.
BY WIRE AND ACH
The beneficiary of a matured Giftrust may authorize us to transmit
redemption proceeds by wire or by the automated bank clearinghouse (ACH). These
services will be effective 15 days after we receive the authorization.
Proceeds from the redemption of shares will normally be transmitted on the
first business day, but not later than the seventh day, following the date of
redemption.
The destination bank usually will receive wired funds the day they are
transmitted or the next day. Funds transferred by ACH will ordinarily be
received within one to seven days after transmission. Once the
Prospectus How To Establish A Giftrust Account 13
funds are transmitted, the time of receipt and the availability of the funds are
not within our control. Wired funds are subject to a charge of $10 to cover bank
wire charges, which is deducted from redemption proceeds.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
If the beneficiary of a matured Giftrust experiences difficulty in making a
telephone redemption during periods of drastic economic or market changes, the
redemption request may be made by regular or express mail. It will be
implemented at the net asset value next determined after the request has been
received, in good order, by us.
We reserve the right to revise or terminate the telephone redemption
privilege at any time.
REDEMPTIONS SPECIFYING A CERTAIN DATE OR PRICE CANNOT BE ACCEPTED AND WILL
BE RETURNED.
Until a Giftrust matures, only the Trustee, as the legal owner of the
shares, may redeem them. The ability of the beneficiary to compel the Trustee to
redeem the shares is subject to the terms of the Giftrust.
TELEPHONE SERVICES
INVESTORS LINE
The grantor of a Giftrust or the beneficiary of the Giftrust, if of legal
age (or if not of legal age, the beneficiary's parents) may reach an Investor
Services Representative by calling us at 1-800-345-2021 from 7 a.m. to 7 p.m.
Central time Monday through Friday. You may request information about our funds
and a current prospectus, speak with an Investor Services Representative about
his/her account, or get answers to any questions about the funds and the
services we offer.
UNUSUAL STOCK MARKET CONDITIONS HAVE IN THE PAST RESULTED IN AN INCREASE IN
THE NUMBER OF SHAREHOLDER TELEPHONE CALLS. THOSE WHO EXPERIENCE DIFFICULTY IN
REACHING US DURING SUCH PERIODS, SHOULD CONSIDER SENDING TRANSACTION
INSTRUCTIONS BY MAIL, EXPRESS MAIL OR COURIER SERVICE, OR USING OUR AUTOMATED
INFORMATION LINE, IF THE CALLER HAS REQUESTED AND RECEIVED AN ACCESS CODE AND IS
NOT ATTEMPTING TO REDEEM SHARES.
AUTOMATED INFORMATION LINE
American Century's 24-hour Automated Information Line allows you to access
hourly market quotes, fund prices and total returns by calling 1-800-345-8765.
The beneficiary of a matured Giftrust may also obtain an access code that will
allow him/her to use the Automated Information Line to make exchange
transactions and obtain information about share balance, account value and the
most recent transaction. REDEMPTION TRANSACTIONS CANNOT BE MADE ON THE AUTOMATED
INFORMATION LINE. Please call us at 1-800-345-2021 for more information on how
to obtain an access code for our Automated Information Line.
HOW TO CHANGE THE ADDRESS OF RECORD
The grantor of a Giftrust or the beneficiary of the Giftrust, if of legal
age (or if not of legal age, the beneficiary's parents) may notify us of changes
in the address of record for the Giftrust account either by writing us or
calling our Investors Line. Because the address of record impacts every piece of
information we send to you, you are urged to notify us promptly of any change of
address.
REPORTS TO SHAREHOLDERS
At the end of each quarter, we will send to the address of record for the
Giftrust account a statement with the complete year-to-date information on
activity in the account. The grantor, or the beneficiary, if of legal age (or if
not of legal age, the beneficiary's parents) may at any time also request a
statement of account activity to be sent to them.
With the exception of the automatic transactions noted below, each time an
investment, redemption or exchange of shares is made, we will send to the
address of record for the Giftrust account a confirmation of the transaction.
Automatic investment purchases and exchanges made in an automatic exchange plan
will be confirmed on the next quarterly statement. Please carefully review all
information in the confirmation or consolidated statement relating to
transactions to ensure that instructions have been acted on properly. Please
notify us in writing if there is an error. If you fail to provide notification
of an
14 How To Establish A Giftrust Account American Century Investments
error with reasonable promptness (i.e., within 30 days of non-automatic
transactions or within 30 days of the date of the quarterly statement, in the
case of the automatic transactions noted above) we will deem the transaction to
be ratified.
No later than January 31 of each year, we will send to the address of
record for the Giftrust account, when applicable, the following reports, which
may be used in completing U.S. income tax returns:
FORM 1099-DIV
Reports taxable distributions during the preceding year. (If the
beneficiary does not receive taxable distributions in the previous year, he or
she will not receive a 1099-DIV.)
FORM 1099-B
Reports proceeds paid on redemptions during the preceding year.
In December of each year, we will send to the address of record for the
Giftrust account an annual report that includes audited financial statements for
the fiscal year ending the preceding October 31 and a list of securities in the
Giftrust portfolio on that date. In June of each year, we will send a semiannual
report that includes unaudited financial statements for the six months ending
the preceding April 30, as well as a list of securities in its portfolio on that
date. Both the annual and semiannual reports are incorporated herein by
reference.
We usually prepare and mail to the address of record a new prospectus dated
March 1 of each year.
Prospectus How To Establish A Giftrust Account 15
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of Giftrust shares is also referred to as their net asset value.
Net asset value is determined by calculating the total value of the fund's
assets, deducting total liabilities and dividing the result by the number of
shares outstanding. For all American Century funds, except funds issued by the
American Century Target Maturities Trust, net asset value is determined as of
the close of regular trading on each day that the New York Stock Exchange is
open, usually 3 p.m. Central time. Net asset value for Target Maturities is
determined one hour prior to the close of the Exchange.
Gifts and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the gift, redemption or exchange
request. For example, gifts and requests to redeem or exchange shares received
by us or our agent before the time as of which the net asset value is
determined, are effective on, and will receive the price determined, that day.
Gifts, redemption and exchange requests received thereafter are effective on,
and receive the price determined as of, the close of the Exchange on, the next
day the Exchange is open.
Investments are considered received from the Trustee only when the payment
representing gifts by a grantor are received by us. Wired funds are considered
received on the day they are deposited in our bank account if they are deposited
before the time as of which the net asset value of the fund is determined.
Gifts by telephone pursuant to an authorization for us to draw on a bank
account are considered received at the time of the telephone call.
Gifts and transaction instructions received by us on any business day by
mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Gifts and instructions received after
that time will receive the price determined on the next business day.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
16 Additional Information You Should Know American Century Investments
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of the fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of our funds are published in leading newspapers
daily. Net asset values may also be obtained by calling us or by accessing our
Web site at www.americancentury.com.
DISTRIBUTIONS
In general, distributions from net investment income and net realized
securities gains, if any, are declared and paid annually on or before December
31, but the fund may make distributions on a more frequent basis to comply with
the distribution requirements of the Internal Revenue Code, in all events in a
manner consistent with the provisions of the Investment Company Act.
Distributions on shares of Giftrust accounts will not be paid in cash and
will be reinvested.
A distribution on shares of the fund does not increase the value of shares
or total return. At any given time the value of shares includes the
undistributed net gains, if any, realized by the fund on the sale of portfolio
securities, and undistributed dividends and interest received, less fund
expenses.
Because such gains and dividends are included in the value of shares, when
they are distributed the value of shares is reduced by the amount of the
distribution. If shares are bought just before the distribution, the full price
will be paid for the shares, and then a portion of the purchase price will be
distributed as a taxable distribution. See "Taxes," this page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders
it pays no income tax.
Distributions of net investment income and net short-term capital gains are
taxable as ordinary income. Distributions from net long-term capital gains are
taxable as long-term capital gains.
Dividends and interest received by the fund on foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Foreign countries generally do not impose taxes on capital
gains in respect of investments by non-resident investors. The foreign taxes
paid by the fund will reduce its dividends.
If more than 50% of the value of the fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by shareholders.
If the fund purchases the securities of certain foreign investment funds or
trusts called passive foreign investment companies, capital gains on the sale of
such holdings will be deemed to be ordinary income regardless of how long the
fund holds its investment. The fund may also be subject to corporate income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable, even if the value of the shares is below their
cost. If shares are purchased shortly before a distribution, income taxes must
be paid on the distribution, even though the value of the investment (plus cash
received, if any) will not have increased. In addition, the share price at the
time shares are purchased may include unrealized gains in the securities held in
the investment portfolio of the fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid as a distribution of
Prospectus Additional Information You Should Know 17
capital gains and will be taxable as short-term or long-term capital gains.
In January of the year following the distribution, we will send, when
applicable, a Form 1099-DIV notifying the beneficiary of a matured Giftrust of
the status of distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if received directly, would be exempt from state
income tax. However, most but not all states allow this tax exemption to pass
through to fund shareholders when a fund pays distributions to its shareholders.
If the beneficiary of a matured Giftrust has not complied with certain
provisions of the Internal Revenue Code and Regulations, we are required by
federal law to withhold and remit to the IRS 31% of reportable payments (which
may include dividends, capital gains distributions and redemptions). Those
regulations require the beneficiary of a matured Giftrust to certify that the
Social Security number or tax identification number provided is correct and that
he/she is not subject to 31% withholding for previous under-reporting to the
IRS. The beneficiary of a matured Giftrust will be asked to make the appropriate
certification upon maturity of the Giftrust.
Redemption of Giftrust shares (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year.
Because it is a gift of a future interest, an investment in a Giftrust does
not qualify for the annual gift tax exclusion of $10,000. If you give a
Giftrust, you must file a United States Gift Tax Return. If you make additional
investments in subsequent years, a Gift Tax Return must be filed for each year's
gift. No gift tax is payable until your cumulative lifetime gifts exceed the
exemption equivalent of $600,000. Each gift is applied against the exemption
equivalent that would otherwise be available in the future.
The income of a Giftrust account is exempt from federal income tax until it
exceeds $100. The Trustee of the Giftrust files federal income tax returns and
pays the income tax out of the assets of the trust. A $10 fee will be charged
against a Giftrust account in each year that the Trustee files a tax return on
behalf of such account. The distribution to the beneficiary at the maturity of
the Giftrust may be subject to the throwback rules under the Internal Revenue
Code. The throwback rules may create additional tax liability for a beneficiary
who is age 21 or older at the time the Giftrust matures. More than one trust for
the same beneficiary may be subject to the provisions of the Internal Revenue
Code with respect to multiple trusts.
The tax laws applicable to trusts in general are quite complex. You should
consider consulting your tax advisor or attorney before opening a Giftrust
account.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc. serves as the investment manager of the
fund. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.
The manager supervises and manages the fund's investment portfolios and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the fund's portfolios as it deems appropriate in pursuit of the fund's
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the fund as necessary between team meetings.
The portfolio manager members of the team managing Giftrust and their work
experience for the last five years are as follows:
18 Additional Information You Should Know American Century Investments
GLENN A. FOGLE, Vice President and Portfolio Manager, joined American
Century in September 1990 as an Investment Analyst, a position he held until
March 1993. At that time he was promoted to Portfolio Manager.
JOHN D. SEITZER, Portfolio Manager, joined American Century in June 1993 as
an Investment Analyst, a position he held until July 1996. At that time he was
promoted to Portfolio Manager. Prior to joining American Century, Mr. Seitzer
attended Indiana University from August 1991 to June 1993, where he obtained his
MBA degree.
The activities of the manager are subject only to directions of the fund's
Board of Directors. The manager pays all the expenses of the fund except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager receives an annual fee
of 1% of the average net assets of the fund.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the rate specified. The fee for the
previous month is calculated by multiplying the applicable fee for such series
by the aggregate average daily closing value of the series' net assets during
the previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the fund.
It provides facilities, equipment and personnel to the fund, and is paid for
such services by the manager.
The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., Chairman of the fund's Board of
Directors, controls American Century Companies by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the fund's investment
manager. The manager pays all expenses for promoting and distributing the fund
shares offered by this Prospectus.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the fund, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the fund is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by phone to 1-800-345-2021 (international
calls: 816-531-5575).
Prospectus Additional Information You Should Know 19
American Century Mutual Funds issues 17 series of $.01 par value shares.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters which must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request a special meeting of
shareholders. We will assist in the communication with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
20 Additional Information You Should Know American Century Investments
NOTES
Notes 21
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7819 Recycled
<PAGE>
PROSPECTUS
[american century company logo]
American
Century (sm)
MARCH 1, 1997
AMERICAN
CENTURY
GROUP
BALANCED
INVESTOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your investment needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.
AMERICAN CENTURY INVESTMENTS
Benham Group(R) American Century Group Twentieth Century(R) Group
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Balanced
PROSPECTUS
MARCH 1, 1997
BALANCED
INVESTOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century Investments, a
family of funds that includes nearly 70 no-load mutual funds covering a variety
of investment opportunities. One of the funds that seeks capital growth and
current income is described in this Prospectus. Its investment objective is
listed on page 2 of this Prospectus. The other funds are described in separate
prospectuses.
Through its Investor Class of shares, American Century offers investors a full
line of no-load funds, investments that have no sales charges or commissions.
This Prospectus gives you information about the fund that you should know before
investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY BALANCED FUND
The Balanced fund seeks capital growth and current income. It is management's
intention to maintain approximately 60% of the fund's assets in common stocks
that are considered by management to have better-than-average prospects for
appreciation and the remainder in bonds and other fixed income securities.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund....................2
Transaction and Operating Expense Table.............4
Financial Highlights................................5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund.....................6
Investment Approach..............................6
Equity Investments...............................6
Fixed Income Investments.........................6
Other Investment Practices, Their Characteristics
and Risks........................................7
Foreign Securities...............................7
Forward Currency Exchange Contracts..............7
Portfolio Turnover...............................8
Repurchase Agreements............................8
Derivative Securities............................9
Portfolio Lending................................9
When-Issued Securities..........................10
Rule 144A Securities............................10
Short Sales.....................................10
Performance Advertising............................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments.......................12
Investing in American Century......................12
How to Open an Account.............................12
By Mail.........................................12
By Wire.........................................12
By Exchange.....................................13
In Person.......................................13
Subsequent Investments..........................13
By Mail.........................................13
By Telephone..................................13
By Online Access..............................13
By Wire.......................................13
In Person.....................................13
Automatic Investment Plan.......................13
How to Exchange from One Account to Another........13
By Mail ......................................14
By Telephone..................................14
By Online Access..............................14
How to Redeem Shares...............................14
By Mail ......................................14
By Telephone..................................14
By Check-A-Month..............................14
Other Automatic Redemptions...................14
Redemption Proceeds.............................14
By Check......................................14
By Wire and ACH...............................14
Special Requirements for Large Redemptions......15
Redemption of Shares in Low-Balance Accounts....15
Signature Guarantee................................15
Special Shareholder Services.......................15
Automated Information Line....................15
Online Account Access.........................16
Open Order Service............................16
Tax-Qualified Retirement Plans................16
Important Policies Regarding Your Investments......16
Reports to Shareholders............................17
Employer-Sponsored Retirement Plans and
Institutional Accounts..........................18
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price........................................19
When Share Price Is Determined..................19
How Share Price Is Determined...................19
Where to Find Information About Share Price.....20
Distributions......................................20
Taxes..............................................20
Tax-Deferred Accounts...........................20
Taxable Accounts................................20
Management.........................................22
Investment Management...........................22
Code of Ethics..................................22
Transfer and Administrative Services............23
Distribution of Fund Shares........................23
Further Information About American Century.........23
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Balanced
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases....................... none
Maximum Sales Load Imposed on Reinvested Dividends............ none
Deferred Sales Load........................................... none
Redemption Fee(1)............................................. none
Exchange Fee.................................................. none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees............................................... 1.00%
12b-1 Fees.................................................... none
Other Expenses(2)............................................. 0.00%
Total Fund Operating Expenses................................. 1.00%
EXAMPLE:
You would pay the following expenses on a 1 year $ 10
$1,000 investment, assuming a 5% annual return and 3 years 32
redemption at the end of each time period: 5 years 55
10 years 122
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of Balanced offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by Securities
and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The fund offers
three other classes of shares, primarily to institutional investors, that have
different fee structures than the Investor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class. A
difference in fees will result in different performance for the other classes.
For additional information about the various classes, see "Further Information
About American Century," page 23.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
BALANCED
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31, except as noted.
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.....$17.70 $15.94 $16.52 $14.89 $15.11 $10.89 $11.84 $10.13 $10.22
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income..................44(2) .48(2) .42 .38 .33 .38 .41 .37 .01
Net Realized and Unrealized Gain (Loss) on
Investment Transactions............. 1.88 2.03 (.58) 1.62 (.23) 4.22 (.62) 1.71 (.10)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total From Investment Operations...... 2.32 2.51 (.16) 2.00 .10 4.60 (.21) 2.08 (.09)
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income............ (.46) (.475) (.416) (.375) (.322) (.384) (.417) (.372) --
From Net Realized Gains
on Investment Transactions.........(1.01) (.274) -- -- -- -- (.320) -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions...................(1.47) (.749) (.416) (.375) (.322) (.384) (.737) (.372) --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period...........$18.55 $17.70 $15.94 $16.52 $14.89 $15.11 $10.89 $11.84 $10.13
======= ======= ====== ======= ======= ======= ======= ======= =======
TOTAL RETURN(3).......................14.04% 16.36% (.93%) 13.64% .63% 42.92% (2.10%) 20.94% (.88%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets................. .99% .98% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net Investment
Income to Average Net Assets....... 2.5% 2.9% 2.7% 2.4% 2.4% 3.1% 3.8% 4.2% 4.4%(4)
Portfolio Turnover Rate............... 130% 85% 94% 95% 100% 116% 104% 171% 99%(4)
Average Commission Paid per
Investment Security Traded......... $.040 $.039 --(5) --(5) --(5) --(5) --(5) --(5) --(5)
Net Assets, End of Period
(in millions) $879 $816 $704 $706 $654 $255 $66 $30 $3
(1) October 20, 1988 (Inception) through October 31, 1988.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
(5) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in the
Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
INVESTMENT APPROACH
The manager intends to invest approximately 60% of the fund's assets in equity
securities, while the remainder will be invested in bonds and other fixed income
securities. A description of the investment style for each class of investment
follows.
EQUITY INVESTMENTS
With the equity portion of the Balanced portfolio, the manager seeks capital
growth by investing in securities, primarily common stocks, that meet certain
fundamental and technical standards of selection (relating primarily to earnings
and revenue acceleration) and have, in the opinion of the manager,
better-than-average potential for appreciation. So long as a sufficient number
of such securities are available, the manager intends to keep the equity portion
of Balanced fully invested in these securities regardless of the movement of
stock prices generally. The fund may purchase securities only of companies that
have a record of at least three years continuous operation.
The manager selects, for the equity portion of the portfolio, securities of
companies whose earnings and revenue trends meet management's standards of
selection. The size of the companies in which a fund invests tends to give it
its own characteristics of volatility and risk. These differences come about
because developments such as new or improved products or methods, which would be
relatively insignificant to a large company, may have a substantial impact on
the earnings and revenues of a small company and create a greater demand and a
higher value for its shares. However, a new product failure which could readily
be absorbed by a large company can cause a rapid decline in the value of the
shares of a smaller company. Hence, it could be expected that the volatility of
the fund will be impacted by the size of companies in which it invests.
FIXED INCOME INVESTMENTS
The manager intends to maintain approximately 40% of the fund's assets in fixed
income securities with a minimum of 25% of that amount in fixed income senior
securities. The fixed income securities in the fund will be chosen based on
their level of income production and price stability. The fund may invest in a
diversified portfolio of debt and other fixed-rate securities payable in United
States currency. These may include obligations of the United States government,
its agencies and instrumentalities; corporate securities (bonds, notes,
preferreds and convertible issues), and sovereign government, municipal,
mortgage-backed and other asset-backed securities.
There are no maturity restrictions on the fixed income securities in which the
fund invests. Under normal market conditions the weighted average portfolio
maturity for the fixed income portfolio will be in the three- to 10-year range.
The manager will actively manage the portfolio, adjusting the weighted average
portfolio maturity in response to expected changes in interest rates. During
periods of rising interest rates, a shorter weighted average maturity may be
adopted in order to reduce the effect of bond price declines on the fund's net
asset value. When interest rates are falling and bond prices rising, a longer
weighted average portfolio maturity may be adopted.
It is the manager's intention to invest the fund's fixed income holdings in
high-grade securities. At least 80% of fixed income assets will be invested in
securities which at the time of purchase are rated
6 Information Regarding the Fund American Century Investments
within the three highest categories by a nationally recognized statistical
rating organization [at least A by Moody's Investors Service, Inc. (Moody's) or
Standard & Poor's Corp. (S&P)].
The remaining portion of the fixed income assets may be invested in issues in
the fourth highest category (Baa by Moody's or BBB by S&P), or, if not rated,
are of equivalent investment quality as determined by the manager and which, in
the opinion of the manager, can contribute meaningfully to the fund's results
without compromising its objectives. Such issues might include a lower-rated
issue where research suggests the likelihood of a rating increase; or a
convertible issue of a company deemed attractive by the equity management team.
According to Moody's, bonds rated Baa are medium-grade and possess some
speculative characteristics. A BBB rating by S&P indicates S&P's belief that a
security exhibits a satisfactory degree of safety and capacity for repayment,
but is more vulnerable to adverse economic conditions or changing circumstances.
See "An Explanation of Fixed Income Securities Ratings" in the Statement of
Additional Information.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities of
foreign issuers, primarily from developed markets, when these securities meet
its standards of selection. The fund may make such investments either directly
in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign
securities. DRs are securities listed on exchanges or quoted in the
over-the-counter market in one country but represent the shares of issuers
domiciled in other countries. DRs may be sponsored or unsponsored. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
The fund may invest in common stocks, convertible securities, preferred stocks,
bonds, notes and other debt securities of foreign issuers, and debt securities
of foreign governments and their agencies. The fund will limit its purchase of
debt securities to investment-grade obligations.
Investments in foreign securities may present certain risks, including those
resulting from fluctuations in currency exchange rates, future political and
economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the fund may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars,
but have a value that is dependent on the performance of a foreign security, as
valued in the currency of its home country. As a result, the value of the fund's
portfolio may be affected by changes in the exchange rates between foreign
currencies and the U.S. dollar, as well as by changes in the market values of
the securities themselves. The performance of foreign currencies relative to the
U.S. dollar may be a factor in the overall performance of the fund.
To protect against adverse movements in exchange rates between currencies, the
fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
Prospectus Information Regarding the Fund 7
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where it would be obligated to deliver an amount
of foreign currency in excess of the aggregate value of its portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed appropriate by
the manager. However, it is anticipated that the fund will enter into portfolio
hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of the
fund's assets will be committed to a segregated account in connection with
portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and there
is no assurance that any attempt to protect the fund against adverse currency
movements through the use of forward currency exchange contracts will be
successful. In addition, the use of forward currency exchange contracts tends to
limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The portfolio turnover rate of the fund is shown in the Financial Highlights
table on page 5 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of the fund may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost that the fund pays directly.
Portfolio turnover may also affect the character of capital gains, if any,
realized and distributed by the fund since short-term capital gains are taxable
as ordinary income.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase obligation,
a repurchase agreement can be considered a loan collateralized by the security
purchased. The fund's risk is the ability of the seller to pay the agreed-upon
repurchase price on the repurchase date. If the seller defaults, the fund may
incur costs in disposing of the collateral, which would reduce the amount
realized thereon. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the value
of the security decreases, the fund could experience a loss.
The fund will limit repurchase agreement transactions to securities issued by
the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the fund's Board of Directors.
The fund will invest no more than 15% of its assets in repurchase agreements
maturing in more than seven days.
8 Information Regarding the Fund American Century Investments
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund may
invest in securities that are commonly referred to as "derivative" securities.
Generally, a derivative is a financial arrangement the value of which is based
on, or "derived" from, a traditional security, asset, or market index. Certain
derivative securities are more accurately described as "index/structured"
securities. Index/structured securities are derivative securities whose value or
performance is linked to other equity securities (such as depositary receipts),
currencies, interest rates, indices or other financial indicators ("reference
indices").
Some "derivatives" such as mortgage-related and other asset-backed securities
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices, or currency exchange rates and for cash management purposes as a
low-cost method of gaining exposure to a particular securities market without
investing directly in those securities.
The fund may not invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment since the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the board will
review the manager's policy for investments in derivative securities annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market. Interest on
loaned securities may not exceed 10% of the annual gross income of the fund
(without offset for realized capital gains). The portfolio lending policy
described in this paragraph is a fundamental policy that may be changed only by
a vote of a majority of the fund's shareholders.
Prospectus Information Regarding the Fund 9
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued basis
without limit when, in the opinion of the manager, such purchases will further
the investment objectives of the fund. The price of when-issued securities is
established at the time commitment to purchase is made. Delivery of and payment
for these securities typically occur 15 to 45 days after the commitment to
purchase. Market rates of interest on debt securities at the time of delivery
may be higher or lower than those contracted for on the when-issued security.
Accordingly, the value of such security may decline prior to delivery, which
could result in a loss to the fund. A separate account for the fund consisting
of cash or high-quality liquid debt securities in an amount at least equal to
the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they present
attractive investment opportunities that otherwise meet the fund's criteria for
selection. Rule 144A securities are securities that are privately placed with
and traded among qualified institutional investors rather than the general
public. Although Rule 144A securities are considered "restricted securities,"
they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission has taken the position that the liquidity of
such securities in the portfolio of a fund offering redeemable securities is a
question of fact for the Board of Directors to determine, such determination to
be based upon a consideration of the readily available trading markets and the
review of any contractual restrictions. The staff also acknowledges that, while
the Board retains ultimate responsibility, it may delegate this function to the
manager. Accordingly, the Board has established guidelines and procedures for
determining the liquidity of Rule 144A securities and has delegated day-to-day
function of determining the liquidity of Rule 144A securities to the manager.
The Board retains the responsibility to monitor the implementation of the
guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain qualified
institutional investors, the liquidity of such securities may be limited
accordingly and the fund may, from time to time, hold a Rule 144A security that
is illiquid. In such an event, the fund's manager will consider appropriate
remedies to minimize the effect on the fund's liquidity. The fund may not invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
SHORT SALES
The fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns at a
current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code and
Regulations.
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund performance may
be shown by presenting one or more performance measurements, including
cumulative total return, average annual total return and yield. Performance data
may be quoted separately for the Investor Class and the other classes.
Cumulative total return data is computed by considering all elements of return,
including reinvestment of dividends and capital gains distributions, over a
stated period of time. Average annual total return is determined by computing
the annual compound return over a stated period of time that would have produced
the fund's cumulative total return over the same period if the fund's
performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period of time
expressed as a percentage of the fund's share price.
10 Information Regarding the Fund American Century Investments
Yield is calculated by adding over a 30-day (or one-month) period all interest
and dividend income (net of fund expenses) calculated on each day's market
values, dividing this sum by the average number of fund shares outstanding
during the period, and expressing the result as a percentage of the fund's share
price on the last day of the 30-day (or one-month) period. The percentage is
then annualized. Capital gains and losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized in
accordance with SEC rules for all stock and bond funds. Because yield accounting
methods differ from the methods used for other accounting purposes, the fund's
yield may not equal the income paid on your shares or the income reported in the
fund's financial statements.
The fund may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
All performance information advertised by the fund is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Fund 11
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The Balanced Fund is a part of the American Century Investments family of mutual
funds. Our family provides a full range of investment opportunities, from the
aggressive equity growth funds in our Twentieth Century Group, to the fixed
income funds in our Benham Group, to the moderate risk and specialty funds in
our American Century Group. Please call 1-800-345-2021 for a brochure or
prospectuses for the other funds in the American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 18.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing your
taxpayer identification number. (You must also certify whether you are subject
to withholding for failing to report income to the IRS.) Investments received
without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 [$1,000 for IRA and Uniform Gifts/Transfers to
Minors Acts ("UGMA/UTMA") accounts]. These minimums will be waived if you
establish an automatic investment plan to your account that is the equivalent of
at least $50 per month. See "Automatic Investment Plan," page 13.
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners (e.g.,
as joint tenants), you must provide us with specific authorization on your
application in order for us to accept written or telephone instructions from a
single owner. Otherwise, all owners will have to agree to any transactions that
involve the account (whether the transaction request is in writing or over the
telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S. dollars to
American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or mail
a completed application and provide your bank with the following information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number.
12 How to Invest with American Century InvestmentsAmerican Century Investments
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation
if an IRA. Specify whether IRA, SEP-IRA or SARSEP-IRA.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on
opening an account by exchanging from another American Century account. See this
page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of our
Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or government
direct deposit (see "Automatic Investment Plan," this page) or by any of the
methods below. The minimum investment requirement for subsequent investments:
$250 for checks submitted without the remittance portion of a previous statement
or confirmation, $50 for all other types of subsequent investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 12 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors Centers.
The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange your
fund shares to our other funds up to six times per year per account. An exchange
request will be processed as of the same day it is received, if it is received
before the funds' net asset values are calculated, which is one hour prior to
the close of the New York Stock Exchange for funds issued by the American
Century Target Maturities Trust, and at the close of the Exchange for all of our
other funds. See "When SHare Price is Determined," page 19.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
Prospectus How to Invest with American Century Investments 13
If, in any 90-day period, the total of your exchanges and your redemptions from
any one account exceeds the lesser of $250,000 or 1% of the fund's assets,
further exchanges will be subject to special requirements to comply with our
policy on large redemptions. See "Special Requirements for Large Redemptions,"
page 15.
BY MAIL
You may direct us in writing to exchange your shares from one American Century
account to another. For additional information, please see our Investor Services
Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line -- see page 15) if you
have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept instructions
over the Internet. You can authorize this by selecting "Full Services" on your
application or by calling us at 1-800-345-2021 to get the appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be made
at the next net asset value determined after a complete redemption request is
received. (For large redemptions, please read "Special Requirements for Large
Redemptions," page 15.)
Please note that a request to redeem shares in an IRA or 403(b) plan must be
accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a redemption
form, which we will send you upon request, or by a letter to us. Certain
redemptions may require a signature guarantee. Please see "Signature Guarantee,"
page 15.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem your
shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem shares by
Check-A-Month. A Check-A-Month plan automatically redeems enough shares each
month to provide you with a check in an amount you choose (minimum $50). To set
up a Check-A-Month plan or request a brochure, please call an Investor Services
Representative.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to make
redemptions automatically by authorizing us to send funds to you or to your
account at a bank or other financial institution. To set up automatic
redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered owner
of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption
14 How to Invest with American Century InvestmentsAmerican Century Investments
proceeds. Once the funds are transmitted, the time of receipt and the funds'
availability are not under our control.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule18f-1 under the Investment Company Act,
which obligates the fund make certain redemptions in cash. This requirement to
pay redemptions in cash applies to situations where one shareholder redeems,
during any 90-day period, up to the lesser of $250,000 or 1% of the assets of
the fund. Although redemptions in excess of this limitation will also normally
be paid in cash, we reserve the right under unusual circumstances to honor these
redemptions by making payment in whole or in part in readily marketable
securities (a "redemption-in-kind").
If payment is made in securities, the securities will be selected by the fund,
will be valued in the same manner as they are in computing the fund's net asset
value and will be provided without prior notice.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
Despite the fund's right to redeem fund shares through a redemption-in-kind, we
do not expect to exercise this option unless the fund has an unusually low level
of cash to meet redemptions and/or is experiencing unusually strong demands for
its cash. Such a demand might be caused, for example, by extreme market
conditions that result in an abnormally high level of redemption requests
concentrated in a short period of time. Absent these or similar circumstances,
we expect redemptions in excess of $250,000 to be paid in cash in any fund with
assets of more than $50 million if total redemptions from any one account in any
90-day period do not exceed one-half of 1% of the total assets of the fund.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the required
minimum, a letter will be sent advising you to either bring the value of the
shares held in the account up to the minimum or to establish an automatic
investment that is the equivalent of at least $50 per month. If action is not
taken within 90 days of the letter's date, the shares held in the account will
be redeemed and the proceeds from the redemption will be sent by check to your
address of record. We reserve the right to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a signature
guarantee. Which transactions will require a signature guarantee will depend on
which service options you elect when you open your account. For example, if you
choose "In Writing Only," a signature guarantee would be required when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit union,
broker-dealer, securities exchange or association, clearing agency or savings
association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if you
live outside the United States and would like to know how to obtain a signature
guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction, or to
change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage. These
are listed on the account application. Please make note of these options and
elect the ones that are appropriate for you. Be aware that the "Full Services"
option offers you the most flexibility. You will find more information about
each of these service options in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week, at
1-800-345-8765. By calling
Prospectus How to Invest with American Century Investments 15
the Automated Information Line, you may listen to fund prices, yields and total
return figures. You may also use the Automated Information Line to make
investments into your accounts (if we have your bank information on file) and
obtain your share balance, value and most recent transactions. If you have
authorized us to accept telephone instructions, you also may exchange shares
from one fund to another via the Automated Information Line. Redemption
instructions cannot be given via the Automated Information Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week, at www.americancentury.com
to access your funds' daily share prices, receive updates on major market
indexes and view historical performance of your funds. If you select "Full
Services" on your application, you can use your personal access code and Social
Security number to view your account balances and account activity, make
subsequent investments from your bank account or exchange shares from one fund
to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy shares
of a variable-priced fund by exchange from one of our money market funds, or a
price at which to sell shares of a variable-priced fund by exchange to one of
our money market funds. The designated purchase price must be equal to or lower,
or the designated sale price equal to or higher, than the variable-priced fund's
net asset value at the time the order is placed. If the designated price is met
within 90 calendar days, we will execute your exchange order automatically at
that price (or better). Open orders not executed within 90 days will be
canceled.
If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are accepted
only by telephone or in person. These transactions are subject to exchange
limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
The fund is available for your tax-deferred retirement plan. Call or write us
and request the appropriate forms for:
o Individual Retirement Accounts (IRAs);
o 403(b) plans for employees of public school systems and non-profit
organizations; or
o Profit sharing plans and pension plans for corporations and other
employers.
If your IRA and 403(b) accounts do not total $10,000, each account is subject to
an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment. Please
refer to the Investor Services Guide for further information about the policies
discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares
for a period of time, or to reject any specific purchase order
(including purchases by exchange). Additionally, purchases may be
refused if, in the opinion of the manager, they are of a size that
would disrupt the management of the fund.
(2) We reserve the right to make changes to any stated investment
requirements, including those that relate to purchases, transfers and
redemptions. In addition, we may also alter, add to or terminate any
investor services and privileges. Any changes may affect all
shareholders or only certain series or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
16 How to Invest with American Century InvestmentsAmerican Century Investments
(4) Transactions requesting a specific price and date, other than open
orders, will be refused. Once you have mailed or otherwise transmitted
your transaction instructions to us, they may not be modified or
canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require
evidence satisfactory to us of the authority of the individual making
the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include
requesting personal identification from callers, recording telephone
calls, and providing written confirmations of telephone transactions.
These procedures are designed to protect shareholders from
unauthorized or fraudulent instructions. If we do not employ
reasonable procedures to confirm the genuineness of instructions, then
we may be liable for losses due to unauthorized or fraudulent
instructions. The company, its transfer agent and investment advisor
will not be responsible for any loss due to instructions they
reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as Mary
Elizabeth Jones, she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an
increase in the number of shareholder telephone calls. If you
experience difficulty in reaching us during such periods, you may send
your transaction instructions by mail, express mail or courier
service, or you may visit one of our Investors Centers. You may also
use our Automated Information Line if you have requested and received
an access code and are not attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research
fee of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated statement
that summarizes all of your American Century holdings, as well as an individual
statement for each fund you own that reflects all year-to-date activity in your
account. You may request a statement of your account activity at any time.
With the exception of most automatic transactions, each time you invest, redeem,
transfer or exchange shares, we will send you a confirmation of the transaction.
See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your statements
and confirmations to ensure that your instructions were acted on properly.
Please notify us immediately in writing if there is an error. If you fail to
provide notification of an error with reasonable promptness, i.e., within 30
days of non-automatic transactions or within 30 days of the date of your
consolidated quarterly statement, in the case of automatic transactions, we will
deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you may use
in completing your U.S. income tax return. See the Investor Services Guide for
more information.
Each year, we will send you an annual and a semiannual report relating to your
fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
Prospectus How to Invest with American Century Investments 17
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to shareholders
who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the fund,
exchange them for shares of other American Century funds, and redeem them will
depend on the terms of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
18 How to Invest with American Century InvestmentsAmerican Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net asset
value is determined by calculating the total value of the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents before the time as of which the net
asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined as of, the close
of the Exchange on, the next day the Exchange is open.
Investments are considered received only when payment is received by us. Wired
funds are considered received on the day they are deposited in our bank account
if they are deposited before the time as of which the net asset value of the
fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw on
your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day by
mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan or
other financial intermediary, it is the responsibility of your plan recordkeeper
or financial intermediary to transmit your purchase, exchange and redemption
requests to the fund's transfer agent prior to the applicable cut-off time for
receiving orders and to make payment for any purchase transactions in accordance
with the fund's procedures or any contractual arrangements with the fund or the
fund's distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets
Prospectus Additional Information You Should Know 19
is normally completed at various times before the close of business on each day
that the New York Stock Exchange is open. If an event were to occur after the
value of a security was established but before the net asset value per share was
determined that was likely to materially change the net asset value, then that
security would be valued at fair value as determined in accordance with
procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock Exchange
is not open and on which the fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of the fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset value of the Investor Class of the fund is published in leading
newspapers daily. The net asset value of the fund may also be obtained by
calling us or by accessing our Web site at www.americancentury.com.
DISTRIBUTIONS
Distributions from net investment income are declared and paid quarterly.
Distributions from net realized securities gains, if any, are declared and paid
once a year, but the fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code and
Regulations, in all events in a manner consistent with the provisions of the
Investment Company Act.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
A distribution on shares of the fund does not increase the value of your shares
or your total return. At any given time the value of your shares includes the
undistributed net gains, if any, realized by the fund on the sale of portfolio
securities, and undistributed dividends and interest received, less fund
expenses.
Because such gains and dividends are included in the value of your shares, when
they are distributed, the value of your shares is reduced by the amount of the
distribution. If you buy your share through a taxable account just before the
distribution, you will pay the full price for your shares, and then receive a
portion of the purchase price back as a taxable distribution. See "Taxes," this
page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a qualified
employer-sponsored retirement or savings plan, income and capital gains
distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless
20 Additional Information You Should Know American Century Investments
of the length of time you have held the shares on which such distributions are
paid. However, you should note that any loss realized upon the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of any distribution of long-term capital gain to you
with respect to such shares.
Dividends and interest received by the fund on foreign securities may give rise
to withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Foreign countries generally do not impose taxes on capital gains in
respect of investments by non-resident investors. The foreign taxes paid by the
fund will reduce its dividends.
If more than 50% of the value of the fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by you.
If the fund purchases the securities of certain foreign investment funds or
trusts called passive foreign investment companies, capital gains on the sale of
such holdings will be deemed to be ordinary income regardless of how long the
fund holds its investment. The fund may also be subject to corporate income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, we are required by federal law to withhold and remit to the IRS
31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed, and is not refundable.
Redemption of shares of the fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be
Prospectus Additional Information You Should Know 21
subject to the "wash sale" rules of the Code, resulting in a postponement of the
recognition of such loss for federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the fund. Acting pursuant to an
investment advisory agreement entered into with the fund, American Century
Investment Management, Inc. serves as the investment manager of the fund. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The manager has been providing investment management
services to investment companies and institutional clients since it was founded
in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the portfolio as it deems appropriate in pursuit of the fund's investment
objectives. Individual portfolio manager members of the team may also adjust
portfolio holdings of the fund as necessary between team meetings.
The portfolio manager members of the team managing Balanced and their work
experience for the last five years are as follows:
JAMES E. STOWERS III, President and Portfolio Manager, joined American Century
in 1981. He is a member of the team that manages the equity portion of Balanced.
BRUCE A. WIMBERLY, Portfolio Manager, joined American Century in September 1994
as an Investment Analyst, a position he held until July 1996. At that time he
was promoted to Portfolio Manager. Prior to joining American Century, Mr.
Wimberly attended Kellogg Graduate School of Management, Northwestern University
from August 1992 to August 1994, where he obtained his MBA degree. Prior to that
he served as a Research Analyst for Frontier Capital Management Company, Boston,
Massachusetts. Mr. Wimberly is a member of the team that manages the equity
portion of Balanced.
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager,
joined American Century as Vice President and Portfolio Manager in November
1989. In April 1993, he became Senior Vice President. He is a member of the team
that manages the fixed income portion of Balanced.
JEFFREY L. HOUSTON, Portfolio Manager, has worked for American Century since
November 1990. He is a member of the team that manages the fixed income portion
of Balanced.
The activities of the manager are subject only to directions of the fund's Board
of Directors. The manager pays all the expenses of the fund except brokerage,
taxes, interest, fees and expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the Investor Class of the fund, the manager
receives an annual fee of 1% of the average net assets.
On the first business day of each month, the fund pays a management fee to the
manager for the previous month at the rate specified. The fee for the previous
month is calculated by multiplying the applicable fee for such series by the
aggregate average daily closing value of the series' net assets during the
previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that
22 Additional Information You Should Know American Century Investments
employees with access to information about the purchase or sale of securities in
the fund's portfolios obtain preclearance before executing personal trades. With
respect to Portfolio Managers and other investment personnel, the Code of Ethics
prohibits acquisition of securities in an initial public offering, as well as
profits derived from the purchase and sale of the same security within 60
calendar days. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage those
funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend-paying agent for the fund. It
provides facilities, equipment and personnel to the fund, and is paid for such
services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the fund as a funding medium, by broker-dealers and financial advisors
for their customers investing in shares of American Century or by sponsors of
multi mutual fund no- or low-transaction fee programs. The manager or an
affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the fund, transactions in shares of
the fund may be executed by brokers or investment advisors who charge a
transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the fund or the
investment manager. You should be aware of the fact that these transactions may
be made directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the fund's Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services, Inc.
(the "Distributor"), a registered broker-dealer and an affiliate of the fund's
investment manager. The manager pays all expenses for promoting and distributing
the Investor Class of fund shares offered by this Prospectus. The Investor Class
of shares does not pay any commissions or other fees to the Distributor or to
any other broker-dealers or financial intermediaries in connection with the
distribution of fund shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was organized as a
Maryland corporation on July 2, 1990. The corporation commenced operations on
February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a
Delaware corporation which had been in business since October 1958. Pursuant to
the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland
corporation was the surviving entity and continued the business of the Delaware
corporation with the same officers and directors, the same shareholders and the
same investment objectives, policies and restrictions.
The principal office of the fund is American Century Tower, 4500 Main Street,
P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may be made by
mail to that address, or by phone to 1-800-345-2021 (international calls:
816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value shares.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
American Century offers four classes of Balanced: an Investor Class, an
Institutional Class, a Service
Prospectus Additional Information You Should Know 23
Class, and an Advisor Class. The shares offered by this Prospectus are Investor
Class shares and have no up-front charges, commissions, or 12b-1 fees.
The other classes of shares are primarily offered to institutional investors or
through institutional distribution channels, such as employer-sponsored
retirement plans or through banks, broker-dealers, insurance companies or other
financial intermediaries. The other classes have different fees, expenses,
and/or minimum investment requirements than the Investor Class. The difference
in the fee structures among the classes is the result of their separate
arrangements for shareholder and distribution services and not the result of any
difference in amounts charged by the manager for core investment advisory
services. Accordingly, the core investment advisory expenses do not vary by
class. Different fees and expenses will affect performance. For additional
information concerning the other classes of shares not offered by this
Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of another class of the
same fund.
Each share, irrespective of series or class, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except for
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for the
fund to hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
24 Additional Information You Should Know American Century Investments
NOTES
Notes 25
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7773 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
BENHAM
GROUP(R)
Cash Reserve
INVESTOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Cash Reserve
PROSPECTUS
MARCH 1, 1997
Cash Reserve
INVESTOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. One of the money market funds
from our Benham Group is described in this Prospectus. Its investment objective
is listed on page 2 of this Prospectus. The other funds are described in
separate prospectuses.
Through its Investor Class of shares, American Century offers investors a
full line of no-load funds, investments that have no sales charges or
commissions.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY - BENHAM CASH RESERVE FUND
Cash Reserve is a money market fund which seeks to obtain maximum current
income consistent with the preservation of principal and maintenance of
liquidity. The fund intends to pursue its investment objective by investing
substantially all of its assets in a portfolio of money market instruments and
maintaining a weighted average maturity of not more than 90 days.
INVESTMENTS IN THE FUND ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER AGENCY. THERE IS NO ASSURANCE THAT THE FUND WILL BE
ABLE TO MAINTAIN A $1.00 SHARE PRICE.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund .....................................2
Transaction and Operating Expense Table ..............................4
Financial Highlights .................................................5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ......................................6
Cash Reserve ......................................................6
Other Investment Practices, Their Characteristics and Risks ..........6
Repurchase Agreements .............................................6
Derivative Securities .............................................7
Portfolio Lending .................................................7
Foreign Securities ................................................8
When-Issued Securities ............................................8
Rule 144A Securities ..............................................8
Performance Advertising ..............................................8
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments ........................................10
Investing in American Century .......................................10
How to Open an Account ..............................................10
By Mail ........................................................10
By Wire ........................................................10
By Exchange ....................................................11
In Person ......................................................11
Subsequent Investments ...........................................11
By Mail ........................................................11
By Telephone ...................................................11
By Online Access ...............................................11
By Wire ........................................................11
In Person ......................................................11
Automatic Investment Plan ........................................11
How to Exchange from One Account to Another .........................11
By Mail ........................................................11
By Telephone ...................................................12
By Online Access ...............................................12
How to Redeem Shares ................................................12
By Mail ........................................................12
By Telephone ...................................................12
By Check-A-Month ...............................................12
Other Automatic Redemptions ....................................12
Redemption Proceeds ..............................................12
By Check .......................................................12
By Wire and ACH ................................................12
Redemption of Shares in Low-Balance Accounts .....................12
Signature Guarantee .................................................13
Special Shareholder Services ........................................13
Automated Information Line .....................................13
CheckWriting ...................................................13
Online Account Access ..........................................13
Open Order Service .............................................14
Tax-Qualified Retirement Plans .................................14
Important Policies Regarding Your Investments .......................14
Reports to Shareholders .............................................15
Employer-Sponsored Retirement Plans and Institutional Accounts ......15
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................................16
When Share Price Is Determined ...................................16
How Share Price Is Determined ....................................16
Where to Find Yield Information ..................................16
Distributions .......................................................16
Taxes ...............................................................17
Tax-Deferred Accounts ............................................17
Taxable Accounts .................................................17
Management ..........................................................17
Investment Management ............................................17
Code of Ethics ...................................................18
Transfer and Administrative Services .............................18
Distribution of Fund Shares .........................................19
Further Information About American Century ..........................19
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Cash
Reserve
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases ......................... none
Maximum Sales Load Imposed on Reinvested Dividends .............. none
Deferred Sales Load ............................................. none
Redemption Fee(1) ............................................... none
Exchange Fee .................................................... none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees ................................................. 0.70%
12b-1 Fees ...................................................... none
Other Expenses(2) ............................................... 0.00%
Total Fund Operating Expenses ................................... 0.70%
EXAMPLE:
You would pay the following expenses on a 1 year $ 7
$1,000 investment, assuming a 5% annual return and 3 years 22
redemption at the end of each time period: 5 years 39
10 years 87
(1) Redemption proceeds sent by wire are subject to a $10 processing charge.
(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than .01 of 1% of average
net assets for the most recent fiscal year.
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of Cash Reserve offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The fund offers
two other classes of shares, primarily to institutional investors, that have
different fee structures than the Investor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class. A
difference in fees will result in different performance for the other classes.
For additional information about the various classes, see "Further Information
About American Century," page 19.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CASH RESERVE
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year .................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income ........... .05 .05 .03 .02 .04 .06 .07 .08 .07 .06
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ...... (.05) (.052) (.032) (.023) (.037) (.058) (.074) (.083) (.065) (.056)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ................. 4.99% 5.38% 3.21% 2.30% 3.74% 5.95% 7.67% 8.66% 6.73% 5.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets ................. .70% .70% .80% 1.00% .98%(3) .97%(3) 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment
Income to Average
Net Assets ......................... 4.88% 5.27% 3.18% 2.30% 3.62% 5.75% 7.40% 8.35% 6.52% 5.80%
Net Assets, End of
Year (in millions) ................. $1,347 $1,470 $1,299 $1,256 $1,488 $1,236 $954 $639 $489 $448
(1) The data presented has been restated to give effect to a 100 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "An Explanation of Fixed Income Securities Ratings" in the
Statement of Additional Information.
CASH RESERVE
Cash Reserve, which seeks to obtain a level of current income consistent
with preservation of capital and maintenance of liquidity, requires a minimum
investment of $2,500 ($1,000 for IRAs). Cash Reserve is designed for investors
who want income and no fluctuation in their principal.
Cash Reserve expects, but cannot guarantee, that it will maintain a
constant share price of $1.00. The fund follows industry-standard guidelines on
the quality and maturity of its investments, purchasing only securities having
remaining maturities of not more than 13 months and by maintaining a weighted
average portfolio maturity of not more than 90 days.
Cash Reserve invests substantially all of its assets in a diversified
portfolio of U.S. dollar denominated high quality money market instruments,
consisting of:
(1) Securities issued or guaranteed by the U.S. government and its agencies and
instrumentalities
(2) Commercial Paper
(3) Certificates of Deposit and Euro Dollar Certificates of Deposit
(4) Bankers' Acceptances
(5) Short-term notes, bonds, debentures, or other debt instruments
(6) Repurchase agreements
These classes of securities may be held in any proportion, and such
proportion may vary as market conditions change.
All portfolio holdings are limited to those which at the time of purchase
have a short-term rating of A-1 by Standard & Poor's Corporation ("S&P") or P-1
by Moody's Investors Services ("Moody's"), or if they have no short-term rating
are issued or guaranteed by an entity having a long-term rating of at least AA
by S&P or Aa by Moody's.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions present
an attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller
6 Information Regarding the Fund American Century Investments
seeks relief under the bankruptcy laws, the disposition of the collateral may be
delayed or limited. To the extent the value of the security decreases, the fund
could experience a loss.
The fund will limit repurchase agreement transactions to securities issued
by the United States government, its agencies and instrumentalities, and will
enter into such transactions with those banks and securities dealers who are
deemed creditworthy pursuant to criteria adopted by the funds' Board of
Directors.
The fund may invest in repurchase agreements with respect to any security
in which the fund is authorized to invest, even if the remaining maturity of the
underlying security would make that security ineligible for purchase by such
fund. The fund will not invest more than 10% of its assets in repurchase
agreements maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund
may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
The fund may not invest in a derivative security unless the reference index
or the instrument to which it relates is an eligible investment for the fund.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including, if
applicable, the right to call the loan to enable the fund to vote the
securities. Such loans may not exceed one-third of the fund's net assets taken
at market. Interest on loaned
Prospectus Information Regarding the Fund 7
securities may not exceed 10% of the annual gross income of the fund (without
offset for realized capital gains). The portfolio lending policy described in
this paragraph is a fundamental policy that may be changed only by a vote of
fund shareholders.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities of
foreign issuers, including foreign governments, when these securities meet its
standards of selection. Securities of foreign issuers may trade in the U.S. or
foreign securities markets. The fund will limit its purchase of debt securities
to U.S. dollar denominated obligations. Such securities will be primarily from
developed markets.
Investments in foreign securities may present certain risks, including
those resulting from future political and economic developments, reduced
availability of public information concerning issuers, and the fact that foreign
issuers are not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements comparable
to those applicable to domestic issuers.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued
basis without the limit when, in the opinion of the manager, such purchases will
further the investment objectives of the fund. The price of when-issued
securities is established at the time commitment to purchase is made. Delivery
of and payment for these securities typically occurs 15 to 45 days after the
commitment to purchase. Market rates of interest on debt securities at the time
of delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of each security may decline prior to delivery,
which could result in a loss to the fund. A separate account for the fund
consisting of cash or high-quality liquid debt securities in an amount at least
equal to the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and the fund may, from time to time, hold a Rule 144A
security that is illiquid. In such an event, the manager will consider
appropriate remedies to minimize the effect on the fund's liquidity. The fund
may not invest more than 10% of its assets, in illiquid securities (securities
that may not be sold within seven days at approximately the price used in
determining the net asset value of fund shares).
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield and
effective yield. Performance data may be quoted separately for the Investor
Class and for the other classes offered by the funds.
Cumulative total return data is computed by considering all elements of
return, including reinvest-
8 Information Regarding the Fund American Century Investments
ment of dividends and capital gains distributions, over a stated period of time.
Average annual total return is determined by computing the annual compound
return over a stated period of time that would have produced the fund's
cumulative total return over the same period if the fund's performance had
remained constant throughout.
A quotation of yield reflects a fund's income over a stated period of time
expressed as a percentage of the fund's share price. In the case of Cash
Reserve, yield is calculated by measuring the income generated by an investment
in the fund over a seven-day period (net of fund expenses). This income is then
"annualized." That is, the amount of income generated by the investment over the
seven-day period is assumed to be generated over each similar period each week
throughout a full year and is shown as a percentage of the investment. The
"effective yield" is calculated in a similar manner but, when annualized, the
income earned by the investment is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of the
assumed reinvestment.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes,
the fund's yield may not equal the income paid on your shares or the income
reported in the fund's financial statements.
The fund may also include in advertisements data comparing performance with
the performance of non-related investment media, published editorial comments
and performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Donoghue's Money Fund Average and the Bank Rate
Monitor National Index of 2 1/2-year CD rates. Fund performance may also be
compared, on a relative basis, to other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results.
Prospectus Information Regarding the Fund 9
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The Cash Reserve Fund is a part of the American Century Investments family
of mutual funds. Our family provides a full range of investment opportunities,
from the aggressive equity growth funds in our Twentieth Century Group, to the
fixed income funds in our Benham Group, to the moderate risk and specialty funds
in our American Century Group. Please call 1-800-345-2021 for a brochure or
prospectuses for the other funds in the American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as information contained
in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 15.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 ($1,000 for IRA accounts).
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION (BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number.
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.
10 How to Invest with American Century Investments American Century Investments
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," on this page) or by
any of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 10 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your Cash Reserve fund shares to our other funds. An exchange request will be
processed as of the same day it is received if it is received before the funds'
net asset values are calculated, which is one hour prior to the close of the New
York Stock Exchange for funds issued by the American Century Target Maturities
Trust, and at the close of the Exchange for all of our other funds.
See "When Share Price is Determined," page 16.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
Prospectus How to Invest with American Century Investments 11
BY TELEPHONE
You may make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line--see page 13) if you have
authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to receive the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a completed redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 13.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
You may redeem shares by Check-A-Month. A Check-A-Month plan automatically
redeems enough shares each month to provide you with a check in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.
OTHER AUTOMATIC REDEMPTIONS
You may elect to make redemptions automatically by authorizing us to send
funds to you or your account at a bank or other financial institution. To set up
automatic redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity of
bringing the value of the shares held in the account up to the minimum. If
action is not taken within 90 days of the letter's date, the shares held in the
account will be redeemed and the proceeds from the redemption will be sent by
check to your address of record. We reserve the right to increase the investment
minimums.
12 How to Invest with American Century Investments American Century Investments
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee will be required
when:
o Redeeming more than $25,000
o Establishing or increasing a Check-A-Month or automatic transfer on
an existing account
You may obtain a signature guarantee from a bank or trust company, credit
union, broker, dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
CHECKWRITING
We offer CheckWriting as a service option for your Cash Reserve account.
CheckWriting allows you to redeem shares in your account by writing a draft
("check") against your account balance. (Shares held in certificate form may not
be redeemed by check.) There is no limit on the number of checks you can write,
but each one must be for at least $100.
When you write a check, you will continue to receive dividends on all
shares until your check is presented for payment to our clearing bank. If you
redeem all shares in your account by check, any accrued distributions on the
redeemed shares will be paid to you in cash on the next monthly distribution
date.
If you want to add CheckWriting to an existing account that offers
CheckWriting, contact us by phone or mail for an appropriate form. For a new
account, you may elect CheckWriting on your purchase application by choosing the
Full Services option. CheckWriting is not available for any account held in an
IRA or 403(b) plan.
CheckWriting redemptions may only be made on checks provided by us.
Currently, there is no charge for checks or for the CheckWriting service.
We will return checks drawn on insufficient funds or on funds from
investments made by any means other than by wire within the previous 15 days.
Neither the company nor our clearing bank will be liable for any loss or
expenses associated with returned checks. Your account may be assessed a $15
service charge for checks drawn on insufficient funds.
A stop payment may be ordered on a check written against your account. We
will use reasonable efforts to stop a payment, but we cannot guarantee that we
will be able to do so. If we are successful in fulfilling a stop-payment order,
your account may be assessed a $15 fee.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indexes and view historical performance of your funds.
If you select "Full Services" on your application, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments
Prospectus How to Invest with American Century Investments 13
from your bank account or exchange shares from one fund to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
The fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts (IRAs)
o 403(b) plans for employees of public school systems and non-profit
organizations
o Profit sharing plans and pension plans for corporations and other
employers
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment
14 How to Invest with American Century Investments American Century Investments
advisor will not be responsible for any loss due to instructions they
reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions and CheckWriting
activity, each time you invest, redeem, transfer or exchange shares, we will
send you a confirmation of the transaction. CheckWriting activity will be
confirmed monthly. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
Prospectus How to Invest with American Century Investments 15
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents before the time as of which the net
asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined as of, the close
of the Exchange on, the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the fund's transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the fund's procedures or any contractual arrangement with the
fund or the fund's distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The securities held by the fund are valued on the basis of amortized cost.
This method involves initially valuing a security at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium paid at
the time of the purchase, rather than determining the security's market value
from day to day.
WHERE TO FIND YIELD INFORMATION
The yield of the Investor Class of Cash Reserve is published weekly in
leading financial publications and daily in many local newspapers. Yield
information may also be obtained by calling us or by accessing our Web site
(www.americancentury.com).
DISTRIBUTIONS
At the close of each day, including Saturdays, Sundays and holidays, net
income plus net realized gains on portfolio securities is determined and
declared as a distribution. The distribution will be paid monthly on the last
Friday of each month, except for year-end distributions which will be made on
the last business day of the year.
You will begin to participate in the distributions the day AFTER your
purchase is effective. See "When Share Price is Determined," above. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed (other than by CheckWriting), the
distribution on the redeemed shares will be included with your redemption
proceeds.
16 Additional Information You Should Know American Century Investments
Cash Reserve does not expect to realize any long-term capital gains, and
accordingly, does not expect to pay any capital gains distributions.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 59 1/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
fixed income funds do not qualify for the 70% dividends-received deduction for
corporations since they are derived from interest income. Distributions from net
long-term capital gains are taxable as long-term capital gains regardless of the
length of time the shares on which such distributions are paid have been held by
the shareholder.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed, and is not refundable.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc., serves as the investment manager of the
fund. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri, 64111.
Prospectus Additional Information You Should Know 17
The manager has been providing investment advisory services to investment
companies and institutional clients since 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the portfolio as it deems appropriate in pursuit of the fund's investment
objectives. Individual portfolio manager members of the team may also adjust
portfolio holdings of the fund or of sectors of the fund as necessary between
team meetings.
The portfolio manager members of the teams managing the fund and their work
experience for the last five years are as follows:
ROBERT V. GAHAGAN, Vice President and Portfolio Manager, has worked for
American Century since May 1983. He became a Portfolio Manager in December
1991. Prior to that he served as Assistant Portfolio Manager.
AMY O'DONNELL, Portfolio Manager, joined Benham in 1988, becoming a member
of its portfolio department in 1988. In 1992 she assumed her current position as
a Portfolio Manager of three other Benham funds.
The activities of the manager are subject only to directions of the fund's
Board of Directors. The manager pays all the expenses of the fund except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager receives an annual fee
of 0.70% of the average net assets of Cash Reserve.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the fund by
the aggregate average daily closing value of the fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer and dividend-paying agent for the fund. It
provides facilities, equipment and personnel to the fund and is paid for such
services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the fund as a funding medium, by broker-dealers and financial advisors
for their customers investing in shares of American Century or by sponsors of
multi mutual fund no- or low-transaction fee programs. The manager or an
affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
18 Additional Information You Should Know American Century Investments
Although there is no sales charge levied by the fund, transactions in
shares of the fund may be executed by brokers or investment advisors who charge
a transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the fund or the
investment manager. You should be aware of the fact that these transactions may
be made directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., Chairman of the Board of Directors
of the fund, controls American Century Companies by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
fund's investment manager. The manager pays all expenses for promoting and
distributing the Investor Class of fund shares offered by this Prospectus. The
Investor Class of shares does not pay any commissions or other fees to the
Distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the fund, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the fund is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by phone to 1-800-345-2021 (international
calls: 816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value
shares. Each series is commonly referred to as a fund. The assets belonging to
each series of shares are held separately by the custodian.
American Century offers three classes of Cash Reserve: an Investor Class, a
Service Class, and an Advisor Class. The shares offered by this Prospectus are
Investor Class shares and have no up-front charges, commissions, or 12b-1 fees.
The other classes of shares are primarily offered to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Investor Class.
The difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the other classes of shares not offered by
this Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting
Prospectus Additional Information You Should Know 19
such class, and (d) each class may have different exchange privileges.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
20 Additional Information You Should Know American Century Investments
NOTES
Notes 21
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7765 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
BENHAM
GROUP(R)
Short-Term Government Fund
Intermediate-Term Government Fund
INVESTOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Short-Term
Government Fund
Intermediate-Term
Government Fund
PROSPECTUS
MARCH 1, 1997
SHORT-TERM GOVERNMENT FUND
INTERMEDIATE-TERM GOVERNMENT FUND
INVESTOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Two of the funds from our Benham
Group that invest primarily in debt instruments of the U.S. government and its
agencies are described in this Prospectus. Their investment objectives are
listed on page 2 of this Prospectus. The other funds are described in separate
prospectuses.
Through its Investor Class, American Century offers investors a full line
of no-load funds, investments that have no sales charges or commissions.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY -- BENHAM
SHORT-TERM GOVERNMENT FUND
The Short-Term Government Fund seeks a competitive level of income. The
fund intends to pursue its investment objective by investing in securities of
the U.S. government and its agencies and maintaining a weighted average maturity
of three years or less.
AMERICAN CENTURY -- BENHAM
INTERMEDIATE-TERM GOVERNMENT FUND
The Intermediate-Term Government Fund seeks a competitive level of income.
The fund intends to pursue its investment objective by investing in securities
of the U.S. government and its agencies and maintaining a weighted average
maturity of three to 10 years.
There is no assurance that the funds will achieve their respective
investment objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds.............................................2
Transaction and Operating Expense Table........................................4
Financial Highlights...........................................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds...............................................7
Short-Term Government Fund and
Intermediate-Term Government Fund..........................................7
Fundamentals of Fixed Income Investing.........................................8
Other Investment Practices, Their Characteristics
and Risks...................................................................9
Portfolio Turnover.........................................................9
Repurchase Agreements......................................................9
Derivative Securities......................................................9
Portfolio Lending.........................................................10
When-Issued Securities....................................................10
Performance Advertising.......................................................11
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments..................................................12
Investing in American Century.................................................12
How to Open an Account........................................................12
By Mail................................................................12
By Wire................................................................12
By Exchange............................................................13
In Person..............................................................13
Subsequent Investments....................................................13
By Mail................................................................13
By Telephone...........................................................13
By Online Access.......................................................13
By Wire................................................................13
In Person..............................................................13
Automatic Investment Plan.................................................13
How to Exchange from One Account to Another...................................13
By Mail................................................................14
By Telephone...........................................................14
By Online Access.......................................................14
How to Redeem Shares..........................................................14
By Mail................................................................14
By Telephone...........................................................14
By Check-A-Month.......................................................14
Other Automatic Redemptions............................................14
Redemption Proceeds.......................................................14
By Check...............................................................14
By Wire and ACH........................................................14
Redemption of Shares in Low-Balance Accounts..............................14
Signature Guarantee...........................................................15
Special Shareholder Services..................................................15
Automated Information Line.............................................15
Online Account Access..................................................15
Open Order Service.....................................................15
Tax-Qualified Retirement Plans.........................................16
Important Policies Regarding Your Investments.................................16
Reports to Shareholders.......................................................16
Employer-Sponsored Retirement
Plans and Institutional Accounts...........................................17
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................................18
When Share Price Is Determined............................................18
How Share Price Is Determined.............................................18
Where to Find Information About Share Price...............................18
Distributions.................................................................18
Taxes 19
Tax-Deferred Accounts.....................................................19
Taxable Accounts..........................................................19
Management....................................................................20
Investment Management.....................................................20
Code of Ethics............................................................21
Transfer and Administrative Services......................................21
Distribution of Fund Shares...................................................21
Further Information About American Century....................................21
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Intermediate-Term Short-Term
Government Fund Government Fund
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C>
Maximum Sales Load Imposed on Purchases....................... none none
Maximum Sales Load Imposed on Reinvested Dividends............ none none
Deferred Sales Load........................................... none none
Redemption Fee(1)............................................. none none
Exchange Fee.................................................. none none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees............................................... 0.75% 0.70%
12b-1 Fees.................................................... none none
Other Expenses(2)............................................. 0.00% 0.00%
Total Fund Operating Expenses................................. 0.75% 0.70%
EXAMPLE:
You would pay the following expenses on a 1 year $ 8 $ 7
$1,000 investment, assuming a 5% annual return and 3 years 24 22
redemption at the end of each time period: 5 years 42 39
10 years 93 87
(1) Redemption proceeds sent by wire are subject to a $10 processing charge.
(2) Other expenses, the fees and expenses (including legal counsel fees) of
those directors who are not "interested persons" as defined in the
Investment Company Act, were less than 0.01 of 1% of average net assets for
the most recent fiscal year.
</TABLE>
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the funds offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares. The funds
offer two other classes of shares, one of which is primarily made available to
retail investors and one that is primarily made available to institutional
investors. The other classes have different fee structures than the Investor
Class. The difference in the fee structures among the classes is the result of
their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. Accordingly, the core investment advisory expenses
do not vary by class. A difference in fees will result in different performance
for those classes. For additional information about the various classes, see
"Further Information About American Century," page 21.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SHORT-TERM GOVERNMENT FUND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants.
Their report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period................ $9.51 $9.27 $9.67 $9.61 $9.41 $9.08 $9.32 $9.42 $9.55 $10.16
----- ----- ----- ----- ----- ----- ----- ----- ----- ------
Income from Investment Operations
Net Investment Income ......... .51 .52 .40 .36 .44 .63 .79 .84 .81 .79
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions........ (.04) .24 (.40) .06 .20 .33 (.24) (.10) (.13) (.49)
---- --- ---- --- --- --- ---- ---- ---- ----
Total Income from
Investment Operations.......... .47 .76 -- .42 .64 .96 .55 .74 .68 .30
--- --- --- --- --- --- --- --- ---
Distributions
From Net Investment Income..... (.51) (.519) (.402) (.36) (.441) (.635) (.789) (.843) (.815) (.792)
From Net Realized Gains
on Investment Transactions..... -- -- -- -- -- -- -- -- -- (.122)
----- ----- ----- ----- ----- ----- ----- ----- ----- ------
Total Distributions............ (.51) (.519) (.402) (.36) (.441) (.635) (.789) (.843) (.815) (.914)
---- ----- ----- ---- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period..... $9.47 $9.51 $9.27 $9.67 $9.61 $9.41 $9.08 $9.32 $9.42 $9.55
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN(2)................. 5.09% 8.42% .07% 4.45% 6.85% 10.99% 6.28% 8.36% 7.44% 3.14%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets.............. .70% .70% .81% 1.00% .99%(3) .99%(3) 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
to Average Net Assets.............. 5.39% 5.53% 4.17% 3.73% 4.62% 6.88% 8.64% 9.10% 8.60% 8.10%
Portfolio Turnover Rate............ 246% 128% 470% 413% 391% 779% 620% 567% 578% 468%
Net Assets, End
of Period (in thousands)........... $349,772 $391,331 $396,753 $511,981 $569,430 $534,515 $455,536 $443,475 $440,380 $335,601
(1) The data presented has been restated to give effect to a 10 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM GOVERNMENT FUND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants.
Their report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $10.04 $9.55 $10.00
------ ----- ------
Income from Investment Operations
Net Investment Income .................................. .54 .58 .34
Net Realized and Unrealized Gain (Loss) ................ (.14) .49 (.45)
---- --- ----
Total from Investment Operations........................ .40 1.07 (.11)
--- ---- ----
Distributions
From Net Investment Income.............................. (.54) (.583) (.343)
From Net Realized Gain on Investment Transactions....... (.06) -- --
------ ----- ------
Total Distributions..................................... (.60) (.583) (.343)
---- ----- -----
Net Asset Value, End of Period............................. $9.84 $10.04 $9.55
===== ====== =====
Total Return(2)......................................... 4.12% 11.58% (1.01%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets....... .74% .74% .75% (3)
Ratio of Net Investment Income to Average Net Assets.... 5.50% 5.99% 5.43% (3)
Portfolio Turnover Rate................................. 112% 137% 205%
Net Assets, End of Period (in thousands)................$24,422 $21,981 $6,280
(1) March 1, 1994 (inception) through October 31, 1994.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(3) Annualized.
</TABLE>
6 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "An Explanation of Fixed Income Securities Ratings" in the
Statement of Additional Information.
SHORT-TERM GOVERNMENT FUND AND
INTERMEDIATE-TERM GOVERNMENT FUND
These funds seek to provide a competitive level of income and limited price
volatility by investing in securities of the U.S. government and its agencies,
securities that are considered to be of the highest credit quality.
The two funds differ in the weighted average maturities of their portfolios
and accordingly, in their degree of risk and level of income. Generally, the
longer the weighted average maturity of a fund's portfolio, the higher the yield
and the greater the price volatility.
The Short-Term Government Fund will maintain a weighted average portfolio
maturity of three years or less. The fund is designed for investors who can
accept some fluctuation in principal in order to earn a higher level of current
income than is generally available from money market securities, but who do not
want as much price volatility as is inherent in longer-term securities.
The Intermediate-Term Government Fund will maintain a weighted average
portfolio maturity of three to 10 years. The fund is designed for investors
seeking a higher level of current income than is generally available from
shorter-term government securities and who are willing to accept a greater
degree of price fluctuation.
The market value of the securities in which the Short-Term Government
Fund and Intermediate-Term Government Fund invest will fluctuate, and
accordingly, the value of your shares will vary from day to day. See
"Fundamentals of Fixed Income Investing," page 8.
Both funds may invest in (1) direct obligations of the United States, such
as Treasury bills, notes and bonds, which are supported by the full faith and
credit of the United States, and (2) obligations (including mortgage-related
securities) issued or guaranteed by agencies and instrumentalities of the U.S.
government that are established under an act of Congress. The securities of some
of these agencies and instrumentalities, such as the Government National
Mortgage Association, are guaranteed as to principal and interest by the U.S.
Treasury, and other securities are supported by the right of the issuer, such as
the Federal Home Loan Banks, to borrow from the Treasury. Other obligations,
including those issued by the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality.
Mortgage-related securities in which the funds may invest include
collateralized mortgage obligations ("CMOs") issued by a U.S. agency or
instrumentality. A CMO is a debt security that is collateralized by a portfolio
or pool of mortgages or mortgage-backed securities. The issuer's obligation to
make interest and principal payments is secured by the underlying pool or
portfolio of mortgages or securities.
The market value of mortgage-related securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of principal
and interest by the U.S. government, is not insured. When interest rates rise,
the market value of those securities may decrease in the same manner as other
debt, but when interest rates decline, their market
Prospectus Information Regarding the Funds 7
value may not increase as much as other debt instruments because of the
prepayment feature inherent in the underlying mortgages. If such securities are
purchased at a premium, the fund will suffer a loss if the obligation is
prepaid. Prepayments will be reinvested at prevailing rates, which may be less
than the rate paid by the prepaid obligation.
For the purpose of determining the weighted average portfolio maturity of
the funds, the manager will consider the maturity of a mortgage-related security
to be the remaining expected average life of the security. The average life of
such securities is likely to be substantially less than the original maturity as
a result of prepayments of principal on the underlying mortgages, especially in
a declining interest rate environment. In determining the remaining expected
average life, the manager makes assumptions regarding prepayments on underlying
mortgages. In a rising interest rate environment, those prepayments generally
decrease, and may decrease below the rate of prepayment assumed by the manager
when purchasing those securities. Such slowdown may cause the remaining maturity
of those securities to lengthen, which will increase the relative volatility of
those securities and, hence, the fund holding the securities.
FUNDAMENTALS OF FIXED INCOME INVESTING
HISTORICAL YIELDS
[line graph - graph data]
30-YEAR 20-YEAR 3-MONTH
TREASURY TAX-EXEMPT TREASURY
BOND.......BONDS ...BILLS
1/92 8%.......6% ......4%
2/92 8%.......6% ......4%
3/92 8%.......6% ......4%
4/92 8%.......6% ......4%
5/92 8%.......6% ......4%
6/92 8%.......6% ......4%
7/92 7%.......6% ......3%
8/92 7%.......6% ......3%
9/92 7%.......6% ......3%
10/92 8%.......6% ......3%
11/92 8%.......6% ......3%
12/92 7%.......6% ......3%
1/93 7%.......6% ......3%
2/93 7%.......5% ......3%
3/93 7%.......6% ......3%
4/93 7%.......6% ......3%
5/93 7%.......6% ......3%
6/93 7%.......5% ......3%
7/93 7%.......5% ......3%
8/93 6%.......5% ......3%
9/93 6%.......5% ......3%
10/93 6%.......5% ......3%
11/93 6%.......5% ......3%
12/93 6%.......5% ......3%
1/94 6%.......5% ......3%
2/94 7%.......5% ......3%
3/94 7%.......6% ......4%
4/94 7%.......6% ......4%
5/94 7%.......6% ......4%
6/94 8%.......6% ......4%
7/94 7%.......6% ......4%
8/94 7%.......6% ......5%
9/94 8%.......6% ......5%
10/94 8%.......6% ......5%
11/94 8%.......7% ......6%
12/94 8%.......6% ......6%
1/95 8%.......6% ......6%
2/95 7%.......6% ......6%
3/95 7%.......6% ......6%
4/95 7%.......6% ......6%
5/95 7%.......6% ......6%
6/95 7%.......6% ......6%
7/95 7%.......6% ......6%
8/95 7%.......6% ......5%
9/95 7%.......6% ......5%
10/95 6%.......5% ......6%
11/95 6%.......5% ......5%
12/95 6%.......5% ......5%
1/96 6%.......5% ......5%
2/96 6%.......5% ......5%
3/96 7%.......6% ......5%
4/96 7%.......6% ......5%
5/96 7%.......6% ......5%
6/96 7%.......6% ......5%
7/96 7%.......6% ......5%
8/96 7%.......6% ......5%
9/96 7%.......6% ......5%
10/96 7%.......6% ......5%
11/96 6%.......6% ......5%
12/96 7%.......6% ......5%
BOND PRICE VOLATILITY
For a given change in interest rates, longer maturity bonds experience a greater
change in price, as shown below:
Price of a 7% Price of same
coupon bond bond if its Percent
Years to now trading yield increases change
Maturity to yield 7% to 8% in price
1 year $100.00 $99.06 -0.94%
3 years 100.00 97.38 -2.62%
10 years 100.00 93.20 -6.80%
30 years 100.00 88.69 -11.31%
YEARS TO MATURITY
[bar graph data]
SHORT-TERM GOVERNMENT FUND
Likely Maturities of Individual Holdings 0-8 years
Expected Weighted Average Portfolio Maturity Range 6 mos.-5 years
INTERMEDIATE-TERM GOVERNMENT FUND
Likely Maturities of Individual Holdings 0-20 years
Expected Weighted Average Portfolio Maturity Range 5-20 years
Over time, the level of interest rates available in the marketplace
changes. As prevailing rates fall, the prices of bonds and other securities that
trade on a yield basis rise. On the other hand, when prevailing interest rates
rise, bond prices fall.
Generally, the longer the maturity of a debt security, the higher its yield
and the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds, to change. If sustained
over time, it would also have the impact of raising or lowering the yield of the
fund.
In addition to the risk arising from fluctuating interest rate levels, debt
securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond ratings
take into account the relative likelihood that such timely payment will occur.
As a result, lower-rated bonds tend to sell at higher yield levels than
top-rated bonds of similar maturity.
8 Information Regarding the Funds American Century Investments
AUTHORIZED QUALITY RANGES
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
Short-Term
Government
Fund x x x x
Intermediate-Term
Government
Fund x x x x
In addition, as economic, political and business developments unfold,
lower-quality bonds, which possess lower levels of protection with regard to
timely payment, usually exhibit more price fluctuation than do higher-quality
bonds of like maturity.
The investment practices of our fixed income funds take into account these
relationships. The portfolio maturity of each fund has implications for the
degree of price volatility and the yield level to be expected from each.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial
Highlights table on pages 5-6 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives. The
manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds
with similar investment objectives. A high turnover rate involves
correspondingly higher transaction costs that are borne directly by a fund.
Portfolio turnover may also affect the character of capital gains, if any,
realized and distributed by a fund since short-term capital gains are taxable as
ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise committed
to the purchase of securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the funds' Board of Directors.
Each of the funds may invest in repurchase agreements with respect to any
security in which that fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such fund. No fund will invest more than 15% of its assets in
repurchase agreements maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities
Prospectus Information Regarding the Funds 9
whose value or performance is linked to other equity securities (such as
depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a bond whose interest rate is indexed to the return on two-year
treasury securities would be a permissible investment (assuming it otherwise
meets the other requirements for the funds), while a security whose underlying
value is linked to the price of oil would not be a permissible investment since
the funds may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including, if
applicable, the right to call the loan to enable the fund to vote the
securities. Such loans may not exceed one-third of the fund's net assets taken
at market. Interest on loaned securities may not exceed 10% of the annual gross
income of the fund (without offset for realized capital gains). The portfolio
lending policy described in this paragraph is a fundamental policy that may be
changed only by a vote of fund shareholders.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without the limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time commitment to purchase is
made. Delivery of and payment for these securities typically occurs 15 to 45
days after the commitment to purchase. Market rates of interest on debt
securities at the time of delivery may be higher or lower than those contracted
for on the when-issued security. Accordingly, the value of each security may
decline prior to delivery, which
10 Information Regarding the Funds American Century Investments
could result in a loss to the fund. A separate account for each fund consisting
of cash or high-quality liquid debt securities in an amount at least equal to
the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
PERFORMANCE ADVERTISING
From time to time, funds may advertise performance data. Fund performance
may be shown by presenting one or more performance measurements, including
cumulative total return or average annual total return and yield. Performance
data may be quoted separately for the Investor Class and for the other classes.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. Yield is calculated by
adding over a 30-day (or one-month) period all interest and dividend income (net
of fund expenses) calculated on each day's market values, dividing this sum by
the average number of fund shares outstanding during the period, and expressing
the result as a percentage of the fund's share price on the last day of the
30-day (or one-month) period. The percentage is then annualized. Capital gains
and losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on your shares or the income reported
in a fund's financial statements.
The funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or Donoghue's Money Fund Report) and publications
that monitor the performance of mutual funds. Performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
In addition, fund performance may be compared to well-known indices of market
performance including the Donoghue's Money Fund Average and the Bank Rate
Monitor National Index of 21/2-year CD rates. Fund performance may also be
compared, on a relative basis, to other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Funds 11
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-sponsored Retirement Plans and Institutional Accounts," page 17.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 ($1,000 for IRA accounts).
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more
than one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI or Free Form Text):
o Taxpayer identification or Social Security number.
o If more than one account, account numbers and amount to be
invested in each account.
12 How to Invest With American Century Investments American Century Investments
o Current tax year, previous tax year or rollover designation if an
IRA. Specify whether IRA, SEP-IRA or SARSEP-IRA.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 12 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your fund shares to our other funds up to six times per year per account. An
exchange request will be processed as of the same day it is received, if it is
received before the funds' net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for funds issued by the
American Century Target Maturities Trust, and at the close of the Exchange for
all of our other funds. See "When Share is Determined", page 18.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges. See "When
Share Price is Determined," page 18.
Prospectus How to Invest with American Century Investments 13
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line -- see page 15) if you
have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 15.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with a check for an amount you choose (minimum
$50). To set up a Check-A-Month plan, please call and request our Check-A-Month
brochure.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds directly to your
account at a bank or other financial institution. To set up automatic
redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Electronically transferred funds may be received up to seven days after
transmission. Wired funds are subject to a $10 fee to cover bank wire charges,
which is deducted from redemption proceeds. Once the funds are transmitted, the
time of receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value
14 How to Invest With American Century Investments American Century Investments
of the shares held in the account up to the minimum. If action is not taken
within 90 days of the letter's date, the shares held in the account will be
redeemed and the proceeds from the redemption will be sent by check to your
address of record. We reserve the right to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee would be
required when:
o redeeming more than $25,000;
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week, at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indexes and view historical performance of your funds.
If you select "Full Services" on your application, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
Prospectus How to Invest with American Century Investments 15
TAX-QUALIFIED RETIREMENT PLANS
Each fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts (IRAs);
o 403(b) plans for employees of public school systems and non-profit
organizations;
o profit sharing plans and pension plans for corporations and other
employers.
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects
16 How to Invest With American Century Investments American Century Investments
all year-to-date activity in your account. You may request a statement of your
account activity at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
Prospectus How to Invest with American Century Investments 17
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined at the close of
regular trading on each day that the New York Stock Exchange is open, usually 3
p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the time as of which
the net asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the funds' procedures or any contractual arrangement with the
funds or the funds' distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of each fund, except as otherwise noted, are
valued through valuations obtained from a commercial pricing service or at the
most recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
When market quotations are not readily available, securities and other
assets are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds are published in
leading newspapers daily. Net asset values also may be obtained by calling us or
by accessing our Web site (www.americancentury.com).
DISTRIBUTIONS
At the close of each day, including Saturdays, Sundays and holidays, net
income is determined and declared as a distribution. The distribution will be
paid monthly on the last Friday of each month, except for year-end
distributions, which will be paid on the last business day of the month.
You will begin to participate in the distributions the day AFTER your
purchase is effective. See "When Share Price is Determined," this page. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
18 Additional Information You Should Know American Century Investments
Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but the funds may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code and Regulations, in all events in a manner consistent with the
provisions of the Investment Company Act.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
TAXES
Each fund has elected to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders, it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
fixed income funds do not qualify for the 70% dividends-received deduction for
corporations since they are derived from interest income. Distributions from net
long-term capital gains are taxable as long-term capital gains, regardless of
the length of time the shares on which such distributions are paid have been
held by the shareholder. However, you should note that any loss realized upon
the sale or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to such shares.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes. The funds will advise
shareholders of the percentage, if any, of the dividends not exempt from federal
income tax.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include
Prospectus Additional Information You Should Know 19
dividends, capital gains distributions and redemptions). Those regulations
require you to certify that the Social Security number or tax identification
number you provide is correct and that you are not subject to 31% withholding
for previous under-reporting to the IRS. You will be asked to make the
appropriate certification on your application. Payments reported by us that omit
your Social Security number or tax identification number will subject us to a
penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed, and is not
refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
The Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri, 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolios of each fund
and directs the purchase and sale of their investment securities. It utilizes a
team of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the funds' portfolios and the funds' asset mix as it deems
appropriate in pursuit of the funds' investment objectives. Individual portfolio
manager members of the team may also adjust portfolio holdings of the funds or
of sectors of the funds as necessary between team meetings.
The portfolio manager members of the teams managing the funds described in
this prospectus and their work experience for the last five years are as
follows:
C. CASEY COLTON, Portfolio Manager, joined BMC in 1990 as a Municipal
Analyst. He was promoted to his current position in 1995. Mr. Colton is a
Chartered Financial Analyst (CFA). He is a member of the team that manages the
Intermediate-Term Government Fund.
ROBERT V. GAHAGAN, Vice President and Portfolio Manager, has worked for
American Century since May 1983. He became a Portfolio Manager in December 1991.
Prior to that he served as Assistant Portfolio Manager. He is a member of the
team that manages the Short-Term Government Fund.
NEWLIN RANKIN, Portfolio Manager, joined BMC in 1994. He has been primarily
responsible for the day-to-day operations of the Benham ARM Fund since January
1995 and is a member of the team that manages the Short-Term Government Fund.
Prior to joining BMC, Mr. Rankin was an Assistant Vice-President at Wells Fargo
Bank from 1991 to 1993.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the
20 Additional Information You Should Know American Century Investments
non-interested person directors (including counsel fees) and extraordinary
expenses.
For the services provided to the Investor Class of the funds, the manager
receives an annual fee at the following rates:
o 0.70 of 1% of the average net assets of Short-Term Government; and
o 0.75 of 1% of the average net assets of Intermediate-Term Government.
On the first business day of each month, each fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for such fund by
the aggregate average daily closing value of each fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer agent and dividend paying agent for the funds.
It provides facilities, equipment and personnel to the funds, and is paid for
such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs. The manager
or an affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the funds, transactions in
shares of the funds may be executed by brokers or investment advisors who charge
a transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the funds or the
investment manager. You should be aware of the fact that these transactions may
be made directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
funds' investment manager. The manager pays all expenses for promoting and
distributing the Investor Class of fund shares offered by this Prospectus. The
Investor Class of shares does not pay any commissions or other fees to the
Distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was
organized as a Maryland corpora-
Prospectus Additional Information You Should Know 21
tion on July 2, 1990. The corporation commenced operations on February 28, 1991,
the date it merged with Twentieth Century Investors, Inc., a Delaware
corporation which had been in business since October 1958. Pursuant to the terms
of the Agreement and Plan of Merger dated July 27, 1990, the Maryland
corporation was the surviving entity and continued the business of the Delaware
corporation with the same officers and directors, the same shareholders and the
same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by phone to 1-800-345-2021 (international
calls: 816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value
shares. Each series is commonly referred to as a fund. The assets belonging to
each series of shares are held separately by the custodian.
American Century offers three classes of each of the funds offered by this
Prospectus: an Investor Class, a Service Class, and an Advisor Class. The shares
offered by this Prospectus are Investor Class shares and have no up-front
charges, commissions, or 12b-1 fees.
The other classes of shares are primarily made available to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Investor Class.
The difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the other classes of shares not offered by
this Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class and (d) each class
may have different exchange privileges.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the funds to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
22 Additional Information You Should Know American Century Investments
NOTES
Notes 23
NOTES
24 Notes American Century Investments
NOTES
Notes 25
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7770 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
BENHAM
GROUP(R)
Limited-Term Bond
Intermediate-Term Bond
Benham Bond
INVESTOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
bonds, stocks, specialty investments and blended portfolios. To make it easier
to identify funds that meet your needs, all American Century funds have been
collected into one of three groups based on investment style and objectives.
These groups, which appear below, are designed to simplify your fund decisions.
American Century Investments
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Limited-Term Bond
Intermediate-Term Bond
Benham Bond
PROSPECTUS
MARCH 1, 1997
Limited-Term Bond
Intermediate-Term Bond o Benham Bond
INVESTOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Three of the funds from our
Benham Group that invest primarily in fixed income or debt instruments are
described in this Prospectus. Their investment objectives are listed on page 2
of this Prospectus. The other funds are described in separate prospectuses.
Through its Investor Class of shares, American Century offers investors a
full line of no-load funds, investments that have no sales charges or
commissions.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY - BENHAM
LIMITED-TERM BOND FUND
The Limited-Term Bond Fund seeks income. The fund intends to pursue its
investment objective by investing in bonds and other debt obligations and
maintaining a weighted average maturity of five years or less.
AMERICAN CENTURY - BENHAM
INTERMEDIATE-TERM BOND FUND
The Intermediate-Term Bond Fund seeks a competitive level of income. The
fund intends to pursue its investment objective by investing in bonds and other
debt obligations and maintaining a weighted average maturity of three to 10
years.
AMERICAN CENTURY - BENHAM BOND FUND
The Benham Bond Fund seeks a high level of income. The fund intends to
pursue its investment objective by investing in bonds and other debt obligations
and maintaining a weighted average maturity of 10 years or greater. Effective
March 1, 1997, the fund's policy regarding portfolio weighted average will
change. As of that date, there will be no weighted average portfolio maturity
requirement for the funds, although it is expected that the fund will invest
primarily in intermediate and long-term bonds. You should consider this
impending policy change prior to making an investment in the fund.
There is no assurance that the funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds.............................................2
Transaction and Operating Expense Table........................................4
Financial Highlights...........................................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds...............................................8
Limited-Term Bond, Intermediate-Term Bond
and Benham Bond.........................................................8
Fundamentals of Fixed Income Investing........................................10
Other Investment Practices, Their
Characteristics and Risks..................................................10
Portfolio Turnover........................................................10
Repurchase Agreements.....................................................11
Derivative Securities.....................................................11
Portfolio Lending.........................................................12
Foreign Securities........................................................12
When-Issued Securities....................................................12
Rule 144A Securities......................................................12
Interest Rate Futures Contracts and
Options Thereon........................................................13
Performance Advertising...................................................14
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments..................................................15
Investing In American Century.................................................15
How to Open an Account........................................................15
By Mail ...............................................................15
By Wire................................................................15
By Exchange............................................................16
In Person..............................................................16
Subsequent Investments....................................................16
By Mail ...............................................................16
By Telephone...........................................................16
By Online Access.......................................................16
By Wire................................................................16
In Person..............................................................16
Automatic Investment Plan.................................................16
How to Exchange from One Account to Another...................................16
By Mail................................................................16
By Telephone...........................................................17
By Online Access.......................................................17
How to Redeem Shares..........................................................17
By Mail ...............................................................17
By Telephone...........................................................17
By Check-A-Month.......................................................17
Other Automatic Redemptions............................................17
Redemption Proceeds.......................................................17
By Check ..............................................................17
By Wire and ACH........................................................17
Redemption of Shares in Low-Balance Accounts..............................17
Signature Guarantee...........................................................18
Special Shareholder Services..................................................18
Automated Information Line................................................18
Online Account Access.....................................................18
Open Order Service........................................................18
Tax-Qualified Retirement Plans............................................19
Important Policies Regarding Your Investments.................................19
Reports to Shareholders.......................................................19
Employer-Sponsored Retirement Plans
and Institutional Accounts.................................................20
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................................21
When Share Price Is Determined............................................21
How Share Price Is Determined.............................................21
Where to Find Information About Share Price...............................22
Distributions.................................................................22
Taxes 22
Tax-Deferred Accounts.....................................................22
Taxable Accounts..........................................................22
Management....................................................................23
Investment Management.....................................................23
Code of Ethics............................................................24
Transfer and Administrative Services......................................24
Distribution of Fund Shares...................................................25
Further Information About American Century....................................25
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Limited-Term Intermediate-Term Benham
Bond Bond Bond
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases....................... none none none
Maximum Sales Load Imposed on Reinvested Dividends............ none none none
Deferred Sales Load........................................... none none none
Redemption Fee(1)............................................. none none none
Exchange Fee.................................................. none none none
ANNUAL FUND OPERATING EXPENSES:
(AS A PERCENTAGE OF NET ASSETS)
Management Fees............................................... 0.70% 0.75% 0.80%
12b-1 Fees.................................................... none none none
Other Expenses(2)............................................. 0.00% 0.00% 0.00%
Total Fund Operating Expenses................................. 0.70% 0.75% 0.80%
EXAMPLE
You would pay the following expenses on a ..............1 year $ 7 $ 8 $ 8
$1,000 investment, assuming a 5% annual return and ....3 years $22 $24 26
redemption at the end of each time period:.............5 years $39 $42 44
10 years $87 $93 99
</TABLE>
(1) Redemption proceeds sent by wire are subject to a $10 processing charge.
(2) Other expenses, which include the fees and expenses (including legal counsel
fees) of those directors who are not "interested persons" as defined in the
Investment Company Act, were less than 0.01 of 1% of average net assets for the
most recent fiscal year.
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the American Century
funds offered by this Prospectus. The example set forth above assumes
reinvestment of all dividends and distributions and uses a 5% annual rate of
return as required by Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The funds offer
two other classes of shares to investors, primarily to institutional investors,
that have different fee structures than the Investor Class. The difference in
the fee structures among the classes is the result of their separate
arrangements for shareholder and distribution services and not the result of any
difference in amounts charged by the manager for core investment advisory
services. Accordingly, the core investment advisory expenses do not vary by
class. A difference in fees will result in different performance for the other
classes. For additional information about the various classes, see "Further
Information About American Century," page 25.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
LIMITED-TERM BOND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
<TABLE>
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $9.96 $9.68 $10.00
----- ----- ------
Income from Investment Operations
Net Investment Income................................... .56 .56 .31
Net Realized and Unrealized Gain (Loss) on
Investment Transactions................................. (.03) .28 (.32)
---- --- ----
Total from Investment Operations........................ .53 .84 (.01)
--- --- ----
Distributions
From Net Investment Income.............................. (.56) (.557) (.312)
---- ----- -----
Net Asset Value, End of Period............................. $9.93 $9.96 $9.68
===== ===== =====
TOTAL RETURN(2)......................................... 5.48% 8.89% (.08%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets....... .68% .69% .70% (3)
Ratio of Net Investment Income to Average Net Assets.... 5.63% 5.70% 4.79% (3)
Portfolio Turnover Rate................................. 121% 116% 48%
Net Assets, End of Period (in thousands)................ $8,092 $7,193 $4,375
(1) March 1, 1994 (inception) through October 31, 1994.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM BOND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 (1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $10.07 $9.53 $10.00
------ ----- ------
Income from Investment Operations
Net Investment Income................................... .58 .59 .34
Net Realized and Unrealized Gain (Loss) on
Investment Transactions................................. (.06) .54 (.47)
---- --- ----
Total from Investment Operations........................ .52 1.13 (.13)
--- ---- ----
Distributions
From Net Investment Income.............................. (.58) (.587) (.337)
From Net Realized Gains on Investment Transactions...... (.10) -- --
---- ------ ------
Total Distributions..................................... (.68) (.587) (.337)
---- ----- -----
Net Asset Value, End of Period............................. $9.91 $10.07 $9.53
===== ====== =====
TOTAL RETURN(2)......................................... 5.36% 12.19% (1.24%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets....... .74% .74% .75% (3)
Ratio of Net Investment Income to Average Net Assets.... 5.90% 6.05% 5.23% (3)
Portfolio Turnover Rate................................. 87% 133% 48%
Net Assets, End of Period (in thousands)................$15,626 $12,827 $4,262
(1) March 1, 1994 (inception) through October 31, 1994.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
</TABLE>
6 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
BENHAM BOND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.$9.78 $8.91 $10.21 $9.92 $9.56 $8.90 $9.54 $9.19 $8.96 $10.00
----- ----- ------ ----- ----- ----- ----- ----- ----- ------
Income from Investment Operations
Net Investment Income............... .60 .61 .58 .66 .63 .75 .80 .82 .84 .48
Net Realized and Unrealized Gain
(Loss) on Investment Transactions...(.14) .87 (1.12) 1.88 .35 .66 (.64) .35 .23 (1.05)
---- --- ----- ---- --- --- ---- --- --- -----
Total from Investment Operations.... .46 1.48 (.54) 2.54 .98 1.41 .16 1.17 1.07 (.57)
--- ---- ---- ---- --- ---- --- ---- ---- ----
Distributions
From Net Investment Income..........(.60) (.611) (.576) (.662) (.622) (.746) (.796) (.819) (.836) (.475)
From Net Realized Gain on
Investment Transactions.............(.01) -- (.186) (1.587) -- -- (.006) -- -- --
---- ----- ------ -----
Total Distributions.................(.61) (.611) (.762) (2.249) (.622) (.746) (.802) (.819) (.836) (.475)
---- ----- ----- ------ ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period.......$9.63 $9.78 $8.91 $10.21 $9.92 $9.56 $8.90 $9.54 $9.19 $8.96
===== ===== ===== ====== ===== ===== ===== ===== ===== =====
Total Return(3).....................4.91% 17.16% (5.47%) 11.81% 10.40% 16.44% 1.93% 13.51% 12.31% (8.63%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets................ .79% .78% .88% 1.00% .98%(4) .96(4) 1.00% 1.00% 1.00% 1.00%(5)
Ratio of Net Investment Income
to Average Net Assets................6.18% 6.53% 6.07% 6.54% 6.30% 8.06% 8.81% 8.83% 9.15% 8.10%(5)
Portfolio Turnover Rate.............. 100% 105% 78% 113% 186% 219% 98% 216% 280% 146%(5)
Net Assets, End of
Period (in thousands)................$142,567 $149,223 $121,012 $172,120 $154,031 $114,342 $77,270 $62,302 $25,788 $9,403
(1) The data presented has been restated to give effect to a 10 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) March 2, 1987 (inception) through October 31, 1987.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
(5) Annualized.
</TABLE>
Prospectus Financial Highlights 7
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "An Explanation of Fixed Income Securities Ratings" in the
Statement of Additional Information.
LIMITED-TERM BOND, INTERMEDIATE-TERM BOND
AND BENHAM BOND
These funds, which seek to provide investors with income through
investments in bonds and other debt instruments, require a minimum investment of
$2,500 ($1,000 for IRAs).
The three funds differ in the weighted average maturities of their
portfolios and accordingly in their degree of risk and level of income.
Generally, the longer the weighted average maturity, the higher the yield and
the greater the price volatility.
Limited-Term Bond will invest primarily in investment grade corporate
securities and other debt instruments and will maintain, under normal market
conditions, a weighted average maturity of five years or less. The fund is
designed for investors seeking a competitive level of current income with
limited price volatility.
Intermediate-Term Bond will invest primarily in investment grade corporate
securities and other debt instruments and will maintain, under normal market
conditions, a weighted average maturity of three to 10 years. The fund is
designed for investors seeking a higher level of current income than is
generally available from shorter-term corporate and government securities and
who are willing to accept a greater degree of price fluctuation.
Benham Bond will invest primarily in investment grade corporate bonds and
other debt instruments. There is no weighted average portfolio maturity
requirement, although it is expected that the fund will primarily invest in
intermediate and long-term bonds. The fund is designed for investors whose
primary goal is a level of current income higher than is generally provided by
money market or short- and intermediate-term securities and who can accept the
generally greater price volatility associated with longer-term bonds.
The value of the shares of all three of these funds will vary from day to
day. See "Fundamentals of Fixed Income Investing," page 10.
Under normal market conditions, each fund will maintain at least 65% of the
value of its total assets in investment grade bonds and other debt instruments.
Under normal market conditions, each of the funds may invest up to 35% of its
assets, and for temporary defensive purposes, up to 100% of its assets, in
short-term money market instruments.
The manager will actively manage the portfolios, adjusting the weighted
average portfolio maturities as necessary in response to expected changes in
interest rates. During periods of rising interest rates, the weighted average
maturity of a fund may be moved to the shorter end of its maturity range in
order to reduce the effect of bond price declines on the fund's net asset value.
When interest rates are falling and bond prices are rising, the weighted average
portfolio maturity may be moved toward the longer end of its maturity range.
To achieve their objectives, the funds may invest in diversified
portfolios of high- and medium-grade debt
8 Information Regarding the Funds American Century Investments
securities payable in United States currency. The funds may invest in securities
which at the time of purchase are rated by a nationally recognized statistical
rating organization or, if not rated, are of equivalent investment quality as
determined by the manager, as follows: short-term notes within the two highest
categories, e.g., at least MIG-2 by Moody's Investor Services ("Moody's") or
SP-2 by Standard and Poor's Corporation ("S&P"); corporate, sovereign
government, and municipal bonds within the four highest categories (for example,
at least Baa by Moody's or BBB by S&P); securities of the United States
government and its agencies and instrumentalities (described below); other types
of securities rated at least P-2 by Moody's or A-2 by S&P. According to Moody's,
bonds rated Baa are medium-grade and possess some speculative characteristics. A
BBB rating by S&P indicates S&Ps belief that a security exhibits a satisfactory
degree of safety and capacity for repayment, but is more vulnerable to adverse
economic conditions or changing circumstances.
The government securities in which the funds may invest include: (1) direct
obligations of the United States, such as Treasury bills, notes and bonds, which
are supported by the full faith and credit of the United States, and (2)
obligations (including mortgage-related securities) issued or guaranteed by
agencies and instrumentalities of the United States government that are
established under an act of Congress. The securities of some of these agencies
and instrumentalities, such as the Government National Mortgage Association, are
guaranteed as to principal and interest by the U.S. Treasury, and other
securities are supported by the right of the issuer, such as the Federal Home
Loan Banks, to borrow from the Treasury. Other obligations, including those
issued by the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
Mortgage-related securities in which the funds may invest include
collateralized mortgage obligations ("CMOs") issued by a United States agency or
instrumentality. A CMO is a debt security that is collateralized by a portfolio
or pool of mortgages or mortgage-backed securities. The issuer's obligation to
make interest and principal payments is secured by the underlying pool or
portfolio of mortgages or securities.
The market value of mortgage-related securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of principal
and interest by the United States government, is not insured. When interest
rates rise, the market value of those securities may decrease in the same manner
as other debt, but when interest rates decline, their market value may not
increase as much as other debt instruments because of the prepayment feature
inherent in the underlying mortgages. If such securities are purchased at a
premium, the fund will suffer a loss if the obligation is prepaid. Prepayments
will be reinvested at prevailing rates, which may be less than the rate paid by
the prepaid obligation.
For the purpose of determining the weighted average portfolio maturity of
the funds, the manager shall consider the maturity of a mortgage-related
security to be the remaining expected average life of the security. The average
life of such securities is likely to be substantially less than the original
maturity as a result of prepayments of principal on the underlying mortgages,
especially in a declining interest rate environment. In determining the
remaining expected average life, the manager makes assumptions regarding
prepayments on underlying mortgages. In a rising interest rate environment,
those prepayments generally decrease, and may decrease below the rate of
prepayment assumed by the manager when purchasing those securities. Such
slowdown may cause the remaining maturity of those securities to lengthen, which
will increase the relative volatility of those securities and, hence, the fund
holding the securities. See "Fundamentals of Fixed Income Investing," page 10.
As noted, each fund may invest up to 35% of its assets, and for temporary
defensive purposes as determined by the manager, up to 100% of its assets in
short-term money market instruments.
Those instruments may include:
(1) Securities issued or guaranteed by the U.S. government and its
agencies and instrumentalities;
(2) Commercial Paper;
(3) Certificates of Deposit and Euro Dollar Certificates of Deposit;
(4) Bankers' Acceptances;
(5) Short-term notes, bonds, debentures, or other debt instruments; and
(6) Repurchase agreements.
Prospectus Information Regarding the Funds 9
These investments must meet the rating standards for the funds. To the
extent a fund assumes a defensive position, the weighted average maturity of its
portfolio may not fall within the ranges stated for the fund.
FUNDAMENTALS OF FIXED INCOME INVESTING
HISTORICAL YIELDS
[line graph - graph data]
30-YEAR 20-YEAR 3-MONTH
TREASURY TAX-EXEMPT TREASURY
BOND.......BONDS ...BILLS
1/92 8%.......6% ......4%
2/92 8%.......6% ......4%
3/92 8%.......6% ......4%
4/92 8%.......6% ......4%
5/92 8%.......6% ......4%
6/92 8%.......6% ......4%
7/92 7%.......6% ......3%
8/92 7%.......6% ......3%
9/92 7%.......6% ......3%
10/92 8%.......6% ......3%
11/92 8%.......6% ......3%
12/92 7%.......6% ......3%
1/93 7%.......6% ......3%
2/93 7%.......5% ......3%
3/93 7%.......6% ......3%
4/93 7%.......6% ......3%
5/93 7%.......6% ......3%
6/93 7%.......5% ......3%
7/93 7%.......5% ......3%
8/93 6%.......5% ......3%
9/93 6%.......5% ......3%
10/93 6%.......5% ......3%
11/93 6%.......5% ......3%
12/93 6%.......5% ......3%
1/94 6%.......5% ......3%
2/94 7%.......5% ......3%
3/94 7%.......6% ......4%
4/94 7%.......6% ......4%
5/94 7%.......6% ......4%
6/94 8%.......6% ......4%
7/94 7%.......6% ......4%
8/94 7%.......6% ......5%
9/94 8%.......6% ......5%
10/94 8%.......6% ......5%
11/94 8%.......7% ......6%
12/94 8%.......6% ......6%
1/95 8%.......6% ......6%
2/95 7%.......6% ......6%
3/95 7%.......6% ......6%
4/95 7%.......6% ......6%
5/95 7%.......6% ......6%
6/95 7%.......6% ......6%
7/95 7%.......6% ......6%
8/95 7%.......6% ......5%
9/95 7%.......6% ......5%
10/95 6%.......5% ......6%
11/95 6%.......5% ......5%
12/95 6%.......5% ......5%
1/96 6%.......5% ......5%
2/96 6%.......5% ......5%
3/96 7%.......6% ......5%
4/96 7%.......6% ......5%
5/96 7%.......6% ......5%
6/96 7%.......6% ......5%
7/96 7%.......6% ......5%
8/96 7%.......6% ......5%
9/96 7%.......6% ......5%
10/96 7%.......6% ......5%
11/96 6%.......6% ......5%
12/96 7%.......6% ......5%
BOND PRICE VOLATILITY
For a given change in interest rates, longer maturity bonds experience a greater
change in price, as shown below:
Price of a 7% Price of same
coupon bond bond if its Percent
Years to now trading yield increases change
Maturity to yield 7% to 8% in price
1 year $100.00 $99.06 -0.94%
3 years 100.00 97.38 -2.62%
10 years 100.00 93.20 -6.80%
30 years 100.00 88.69 -11.31%
YEARS TO MATURITY
[bar graph - graph data]
LIMITED-TERM BOND
Likely Maturities of Individual Holdings 0-8 years
Expected Weighted Average Portfolio Maturity Range 6 mos.-5 years
INTERMEDIATE-TERM BOND
Likely Maturities of Individual Holdings 0-20 years
Expected Weighted Average Portfolio Maturity Range 3-20 years
BENHAM BOND
Likely Maturities of Individual Holdings 0-30 years
Expected Weighted Average Portfolio Maturity Range 10-20 years
Over time, the level of interest rates available in the marketplace
changes. As prevailing rates fall, the prices of bonds and other securities that
trade on a yield basis rise. On the other hand, when prevailing interest rates
rise, bond prices fall.
Generally, the longer the maturity of a debt security, the higher its yield
and the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds, to change. If sustained
over time, it would also have the impact of raising or lowering the yield of the
fund.
In addition to the risk arising from fluctuating interest rate levels, debt
securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond ratings
take into account the relative likelihood that such timely payment will occur.
As a result, lower-rated bonds tend to sell at higher yield levels than
top-rated bonds of similar maturity.
[bar graph data]
AUTHORIZED QUALITY RANGES
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
Limited-Term Bond x x x x
Intermediate-Term
Bond x x x x
Benham Bond x x x x
In addition, as economic, political and business developments unfold,
lower-quality bonds, which possess lower levels of protection with regard to
timely payment, usually exhibit more price fluctuation than do higher-quality
bonds of like maturity.
The investment practices of our fixed income funds take into account these
relationships. The maturity and asset quality of each fund have implications for
the degree of price volatility and the yield level to be expected from each.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial
Highlights table on pages 5, 6 and 7 of this Prospectus.
10 Information Regarding the Funds American Century Investments
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the particular fund's
objectives. The manager believes that the rate of portfolio turnover is
irrelevant when it determines a change is in order to achieve those objectives
and accordingly, the annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise committed
to the purchase of securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued
by the United States government, its agencies and instrumentalities, and will
enter into such transactions with those banks and securities dealers who are
deemed creditworthy pursuant to criteria adopted by the funds' Board of
Directors.
Each of the funds may invest in repurchase agreements with respect to any
security in which that fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such fund. No fund will invest more than 15% of its assets in
repurchase agreements maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a bond whose interest rate is indexed to the return on two-year
treasury securities would be a permissible investment (assuming it otherwise
meets the other requirements for the funds), while a security whose underlying
value is linked to the price of oil would not be a permissible investment since
the funds may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
Prospectus Information Regarding the Funds 11
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including, if
applicable, the right to call the loan to enable the fund to vote the
securities. Such loans may not exceed one-third of the fund's net assets taken
at market. Interest on loaned securities may not exceed 10% of the annual gross
income of the fund (without offset for realized capital gains). The portfolio
lending policy described in this paragraph is a fundamental policy that may be
changed only by a vote of fund shareholders.
FOREIGN SECURITIES
Each of the funds may invest an unlimited amount of its assets in the
securities of foreign issuers, including foreign governments, when these
securities meet their standards of selection. Securities of foreign issuers may
trade in the U.S. or foreign securities markets. The funds will limit their
purchase of debt securities to U.S. dollar denominated investment grade
obligations. Such securities will be primarily from developed markets.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without the limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time commitment to purchase is
made. Delivery of and payment for these securities typically occurs 15 to 45
days after the commitment to purchase. Market rates of interest on debt
securities at the time of delivery may be higher or lower than those contracted
for on the when-issued security. Accordingly, the value of each security may
decline prior to delivery, which could result in a loss to the fund. A separate
account for each fund consisting of cash or high-quality liquid debt securities
in an amount at least equal to the when-issued commitments will be established
and maintained with the custodian. No income will accrue to the fund prior to
delivery.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds' cri-
12 Information Regarding the Funds American Century Investments
teria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A security
that is illiquid. In such an event, the funds' manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
INTEREST RATE FUTURES CONTRACTS
AND OPTIONS THEREON
The funds may buy and sell interest rate futures contracts relating to debt
securities ("debt futures," i.e., futures relating to debt securities, and "bond
index futures," i.e., futures relating to indexes on types or groups of bonds)
and write and buy put and call options relating to interest rate futures
contracts.
For options sold, a fund will segregate cash or high-quality debt
securities equal to the value of securities underlying the option unless the
option is otherwise covered.
A fund will deposit in a segregated account with its custodian bank
high-quality debt obligations in an amount equal to the fluctuating market value
of long futures contracts it has purchased, less any margin deposited on its
long position. It may hold cash or acquire such debt obligations for the purpose
of making these deposits.
A fund will purchase or sell futures contracts and options thereon only for
the purpose of hedging against changes in the market value of its portfolio
securities or changes in the market value of securities that it may wish to
include in its portfolio. A fund will enter into future and option transactions
only to the extent that the sum of the amount of margin deposits on its existing
futures positions and premiums paid for related options do not exceed 5% of its
assets.
Since futures contracts and options thereon can replicate movements in the
cash markets for the securities in which a fund invests without the large cash
investments required for dealing in such markets, they may subject a fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are (1) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (2) possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need for additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.
The manager will attempt to create a closely correlated hedge but hedging
activity may not be completely successful in eliminating market value
fluctuation. The ordinary spreads between prices in the cash and futures
markets, due to the differences in the natures of those markets, are subject to
distortion. Due to the possibility of distortion, a correct forecast of general
interest rate trends by the manager may still not result in a successful
transaction. The
Prospectus Information Regarding the Funds 13
manager may be incorrect in its expectations as to the extent of various
interest rate movements or the time span within which the movements take place.
See the Statement of Additional Information for further information about
these instruments and their risks.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return and yield.
Performance data may be quoted separately for the Investor Class and for the
other classes.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. Yield is calculated by
adding over a 30-day (or one-month) period all interest and dividend income (net
of fund expenses) calculated on each day's market values, dividing this sum by
the average number of fund shares outstanding during the period, and expressing
the result as a percentage of the fund's share price on the last day of the
30-day (or one-month) period. The percentage is then annualized. Capital gains
and losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on your shares or the income reported
in a fund's financial statements.
The funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or Donoghue's Money Fund Report) and publications
that monitor the performance of mutual funds. Performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
In addition, fund performance may be compared to well-known indices of market
performance including the Donoghue's Money Fund Average and the Bank Rate
Monitor National Index of 21/2-year CD rates. Fund performance may also be
compared, on a relative basis, to other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
14 Information Regarding the Funds American Century Investments
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century, including
purchases, redemptions, exchanges and special services. You will find more
detail about doing business with us by referring to the Investor Services Guide
that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as information contained
in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 20.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 ($1,000 for IRAs).
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.
Prospectus How To Invest With American Century Investments 15
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 15 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your fund shares to our other funds up to six times per year per account. An
exchange request will be processed as of the same day it is received if it is
received before the funds' net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for funds issued by the Benham
Target Maturities Trust, and at the close of the Exchange for all of our other
funds. See "When Share Price is Determined," page 21.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to
16 How To Invest With American Century Investments American Century Investments
another. For additional information, please see our Investor Services Guide.
BY TELEPHONE
You may make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line -- see page 18) if you
have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to receive the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a completed redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 18.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with a check in an amount you choose (minimum
$50). To set up a Check-A-Month plan, please call and request our Check-A-Month
brochure.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds to you or your
account at a bank or other financial institution. To set up automatic
redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity of
bringing the value of the shares held in the account up to the minimum. If
action is not taken within 90 days of the letter's date, the shares held in the
account will be redeemed and the proceeds from the redemption will
Prospectus How To Invest With American Century Investments 17
be sent by check to your address of record. We reserve the right to increase
the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee will be required
when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You may obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indexes and view historical performance of your funds.
If you select "Full Services" on your applications, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
18 How To Invest With American Century Investments American Century Investments
TAX-QUALIFIED RETIREMENT PLANS
Each fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts (IRAs);
o 403(b) plans for employees of public school systems and non-profit
organizations; or
o Profit sharing plans and pension plans for corporations and other
employers.
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects
Prospectus How To Invest With American Century Investments 19
all year-to-date activity in your account. You may request a statement of your
account activity at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
20 How To Invest With American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the time as of which
the net asset value of the fund is determined, are effective on, and receive the
price determined on, the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the close of business on the Exchange.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value is determined, are
effective on, and will receive the price determined, that day. Investments and
instructions received after that time will receive the price determined on the
next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption request to the funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the funds' procedures or any contractual arrangement with the
funds or the funds' distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the
Prospectus Additional Information You Should Know 21
value of a security was established but before the net asset value per share was
determined that was likely to materially change the net asset value, then that
security would be valued at fair value as determined in accordance with
procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds offered by this
Prospectus are published in leading newspapers daily. Net asset values may also
be obtained by calling us or by accessing our Web site
(www.americancentury.com).
DISTRIBUTIONS
At the close of each day, including Saturdays, Sundays and holidays, net
income of the funds is determined and declared as a distribution. The
distribution will be paid monthly on the last Friday of each month except for
year-end distributions, which will be paid on the last business day of the year.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 21. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but the funds may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code and Regulations, in all events in a manner consistent with the
provisions of the Investment Company Act.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.
TAXES
Each fund has elected to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders, it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
fixed income funds do not qualify for the 70% dividends-received deduction for
corporations since they are derived from interest income. Distributions from net
long-term capital gains are taxable as long-term capital gains regardless
22 Additional Information You Should Know American Century Investments
of the length of time the shares on which such distributions are paid have been
held by the shareholder. However, you should note that any loss realized upon
the sale or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to such shares.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed, and is not refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of Mutual Funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
Prospectus Additional Information You Should Know 23
The manager supervises and manages the investment portfolio of the funds
and directs the purchase and sale of their investment securities. It utilizes
teams of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The teams meet regularly to review
portfolio holdings and to discuss purchase and sale activity. The teams adjust
holdings in the funds' portfolios as they deem appropriate in pursuit of the
funds' investment objectives. Individual portfolio manager members of the teams
may also adjust portfolio holdings of the funds as necessary between team
meetings.
The portfolio manager members of the teams managing the funds described in
this Prospectus and their work experience for the last five years are as
follows:
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio
Manager, joined American Century as Vice President and Portfolio Manager in
November 1989. In April 1993, he became Senior Vice President.
JEFFREY L. HOUSTON, Portfolio Manager, has worked for American Century
since November 1990.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the Investor Class of the funds, the manager
receives an annual fee at the following rates:
o 0.70% of the average net assets of Limited-Term Bond;
o 0.75% of the average net assets of Intermediate-Term Bond; and
o 0.80% of the average net assets of Benham Bond.
On the first business day of each month, each fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for such fund by
the aggregate average daily closing value of each fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides facilities, equipment and personnel to the funds and is paid for
such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs. The manager
or an affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the funds, transactions in
shares of the funds may be executed by brokers or investment advisors who charge
a transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the funds or the
investment manager. You should be aware of the fact that these transactions may
be made directly with American Century without incurring such fees.
24 Additional Information You Should Know American Century Investments
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
funds' investment manager. The manager pays all expenses for promoting and
distributing the Investor Class of fund shares offered by this Prospectus. The
Investor Class of shares does not pay any commissions or other fees to the
Distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-2021
(international calls: 816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value
shares. Each series is commonly referred to as a fund. The assets belonging to
each series of shares are held separately by the custodian.
American Century offers three classes of each of the funds offered by this
Prospectus: an Investor Class, a Service Class, and an Advisor Class. The shares
offered by this Prospectus are Investor Class shares and have no up-front
charges, commissions, or 12b-1 fees.
The other classes of shares are primarily offered to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Investor Class.
The difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the other classes of shares not offered by
this Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class and (d) each class
may have different exchange privileges.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
Prospectus Additional Information You Should Know 25
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the funds to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
26 Additional Information You Should Know American Century Investments
NOTES
Notes 27
NOTES
28 Notes American Century Investments
NOTES
Notes 29
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7769 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
BENHAM
GROUP(R)
Limited-Term Tax-Exempt Fund
Intermediate-Term Tax-Exempt Fund
Long-Term Tax-Exempt Fund
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Limited-Term
Tax-Exempt Fund o
Intermediate-Term
Tax-Exempt Fund o
Long-Term
Tax-Exempt Fund
PROSPECTUS
MARCH 1, 1997
Limited-Term Tax-Exempt Fund
Intermediate-Term Tax-Exempt Fund
Long-Term Tax-Exempt Fund
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Three of the funds from our
Benham Group that invest in tax-exempt fixed income or debt instruments are
described in this Prospectus. Their investment objectives are listed on page 2
of this Prospectus. The other funds are described in separate prospectuses.
American Century offers investors a full line of no-load funds, investments
that have no sales charges or commissions.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY - BENHAM
LIMITED-TERM TAX-EXEMPT FUND
The Limited-Term Tax-Exempt Fund seeks income generally exempt from federal
income taxes. The fund intends to pursue its investment objective by investing
in tax-exempt bonds and maintaining a weighted average maturity of three years
or less. Effective March 1, 1997, the fund's policy regarding portfolio weighted
average maturity will change. As of that date, the weighted average maturity
maintained by the fund will be five years or less. You should consider this
impending policy change prior to making an investment in this fund.
AMERICAN CENTURY - BENHAM
INTERMEDIATE-TERM TAX-EXEMPT FUND
The Intermediate-Term Tax-Exempt Fund seeks a competitive level of income
generally exempt from federal income taxes. The fund intends to pursue its
investment objective by investing in tax-exempt bonds and maintaining a weighted
average maturity of three to 10 years.
AMERICAN CENTURY - BENHAM
LONG-TERM TAX-EXEMPT FUND
The Long-Term Tax-Exempt Fund seeks a high level of income generally exempt
from federal income taxes. The fund intends to pursue its investment objective
by investing in longer-term tax-exempt bonds and maintaining a weighted average
maturity of 10 years or greater.
There is no assurance that the funds will achieve their respective
investment objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds ...................................2
Transaction and Operating Expense Table ..............................4
Financial Highlights .................................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds .....................................8
Limited-Term Tax-Exempt Fund,
Intermediate-Term Tax-Exempt Fund and
Long-Term Tax-Exempt Fund .........................................8
Fundamentals of Fixed Income Investing ...............................9
Tax-Exempt Securities ...............................................10
Other Investment Practices, Their Characteristics and Risks .........10
Portfolio Turnover ...............................................10
Repurchase Agreements ............................................10
Derivative Securities ............................................11
When-Issued Securities ...........................................12
Rule 144A Securities .............................................12
Interest Rate Futures Contracts and Options Thereon ..............12
Performance Advertising .............................................13
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments ........................................15
Investing in American Century .......................................15
How to Open an Account ..............................................15
By Mail ........................................................15
By Wire ........................................................15
By Exchange ....................................................16
In Person ......................................................16
Subsequent Investments ...........................................16
By Mail ........................................................16
By Telephone ...................................................16
By Online Access ...............................................16
By Wire ........................................................16
In Person ......................................................16
Automatic Investment Plan ........................................16
How to Exchange from One Account to Another .........................16
By Mail ........................................................17
By Telephone ...................................................17
By Online Access ...............................................17
How to Redeem Shares ................................................17
By Mail ........................................................17
By Telephone ...................................................17
By Check-A-Month ...............................................17
Other Automatic Redemptions ....................................17
Redemption Proceeds ..............................................17
By Check .......................................................17
By Wire and ACH ................................................17
Redemption of Shares in Low-Balance Accounts .....................17
Signature Guarantee .................................................18
Special Shareholder Services ........................................18
Automated Information Line .....................................18
Online Account Access ..........................................18
CheckWriting ...................................................18
Open Order Service .............................................19
Important Policies Regarding Your Investments .......................19
Reports to Shareholders .............................................20
Employer-Sponsored Retirement Plans
and Institutional Accounts .......................................20
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................................21
When Share Price Is Determined ...................................21
How Share Price Is Determined ....................................21
Where to Find Information About Share Price ......................21
Distributions .......................................................21
Taxes ...............................................................22
Management ..........................................................23
Investment Management ............................................23
Code of Ethics ...................................................24
Transfer and Administrative Services .............................24
Distribution of Fund Shares .........................................24
Further Information About American Century ..........................24
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Limited-Term
Tax-Exempt Fund
Intermediate-Term
Tax-Exempt Fund
Long-Term
Tax-Exempt Fund
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases .......................... none
Maximum Sales Load Imposed on Reinvested Dividends ............... none
Deferred Sales Load .............................................. none
Redemption Fee(1) ................................................ none
Exchange Fee ..................................................... none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees(2) ............................................... 0.60%
12b-1 Fees ....................................................... none
Other Expenses(3) ................................................ 0.00%
Total Fund Operating Expenses .................................... 0.60%
EXAMPLE:
You would pay the following expenses on a 1 year $ 6
$1,000 investment, assuming a 5% annual return and 3 years 19
redemption at the end of each time period: 5 years 34
10 years 75
(1) Redemption proceeds sent by wire are subject to a $10 processing charge.
(2) A portion of the management fee may be paid by the funds' manager to
unaffiliated third parties who provide recordkeeping and administrative
services that would otherwise be performed by an affiliate of the manager.
See "Management - Transfer and Administrative Services," page 24.
(3) Other expenses, the fees and expenses (including legal counsel fees) of
those directors who are not "interested persons" as defined in the
Investment Company Act, were less than 0.01 of 1% of average net assets for
the most recent fiscal year.
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the shares of the funds offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by Securities
and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
LIMITED-TERM TAX-EXEMPT FUND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 1993(1)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $10.09 $9.95 $10.04 $10.00
------- ------- ------- -------
Income from Investment Operations
Net Investment Income ................................. .43 .44 .36 .21
Net Realized and Unrealized Gain (Loss) on
Investment Transactions ............................... (.01) .14 (.09) .04
------- ------- ------- -------
Total From Investment Operations ...................... .42 .58 .27 .25
------- ------- ------- -------
Distributions
From Net Investment Income ............................ (.43) (.440) (.362) (.214)
------- ------- ------- -------
Net Asset Value, End of Period ........................... $10.08 $10.09 $9.95 $10.04
======= ======= ======= =======
TOTAL RETURN(2) ....................................... 4.26% 5.95% 2.75% 2.55%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .................................... .38%(3) -- -- --
Ratio of Net Investment Income
to Average Net Assets ................................. 4.28% 4.38% 3.62% 3.09%(4)
Portfolio Turnover Rate ............................... 68% 78% 42% 3%
Net Assets, End of Period (in thousands) .............. $49,866 $58,837 $60,857 $52,265
(1) March 1, 1993 (inception) through October 31, 1993.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) The manager voluntarily waived its management fee through February 29,
1996. In the absence of the waiver, the ratio of operating expenses to
average net assets would have been .60%.
(4) Annualized.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM TAX-EXEMPT FUND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period ........................ $10.45 $10.01 $10.75 $10.27 $10.06 $9.66 $9.67 $9.73 $9.42 $10.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income ................... .48 .49 .48 .48 .48 .54 .56 .56 .54 .30
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ....... (.03) .52 (.61) .55 .21 .40 (.01) (.06) .31 (.58)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From
Investment Operations ................... .45 1.01 (.13) 1.03 .69 .94 .55 .50 .85 (.28)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income .............. (.48) (.487) (.476) (.476) (.481) (.536) (.560) (.558) (.539) (.300)
From Net Realized Gains on
Investment Transactions ................. (.07) (.082) (.133) (.078) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ..................... (.55) (.569) (.609) (.554) (.481) (.536) (.560) (.558) (.539) (.300)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............. $10.35 $10.45 $10.01 $10.75 $10.27 $10.06 $9.66 $9.67 $9.73 $9.42
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3) ......................... 4.47% 10.41% (1.25)% 10.25% 7.00% 9.91% 5.89% 5.30% 9.18% (4.34)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets ...................... .60% .60% .60% .72% .98%(4) .96%(4) 1.00% 1.00% 1.00% 1.00%(5)
Ratio of Net Investment Income
to Average Net Assets ................... 4.66% 4.77% 4.59% 4.51% 4.68% 5.40% 5.80% 5.79% 5.57% 4.80%(5)
Portfolio Turnover Rate ................. 39% 32% 74% 38% 36% 62% 102% 74% 86% 92%(5)
Net Assets, End
of Period (in thousands) ................$80,568 $80,248 $81,400 $98,740 $76,745 $45,359 $25,587 $20,616 $14,286 $8,262
(1) The data presented has been restated to give effect to a 10 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) March 2, 1987 (inception) through October 31, 1987.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
(5) Annualized.
</TABLE>
6 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
LONG-TERM TAX-EXEMPT FUND
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)(2)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period ........................ $10.54 $9.75 $11.10 $10.36 $10.23 $9.62 $9.84 $9.73 $9.09 $10.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income ................... .53 .53 .52 .53 .53 .57 .60 .62 .61 .37
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ....... .04 .83 (1.01) .90 .22 .61 (.12) .11 .64 (.91)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From
Investment Operations ................... .57 1.36 (.49) 1.43 .75 1.18 .48 .73 1.25 (.54)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income .............. (.53) (.532) (.519) (.529) (.530) (.572) (.604) (.623) (.609) (.370)
From Net Realized Gains on
Investment Transactions ................. -- (.044) (.342) (.161) (.088) -- (.094) -- -- --
In Excess of Net Realized Gains ......... -- -- -- (.003) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ..................... (.53) (.576) (.861) (.693) (.618) (.572) (.698) (.623) (.609) (.370)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............. $10.58 $10.54 $9.75 $11.10 $10.36 $10.23 $9.62 $9.84 $9.73 $9.09
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3) ......................... 5.60% 14.45% (4.70)% 14.32% 7.43% 12.54% 5.04% 7.75% 14.15% (8.21)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets ...................... .59% .59% .60% .73% .98%(4) .96%(4) 1.00% 1.00% 1.00% 1.00%(5)
Ratio of Net Investment Income
to Average Net Assets ................... 5.06% 5.24% 5.00% 4.90% 5.07% 5.73% 6.22% 6.36% 6.43% 6.20%(5)
Portfolio Turnover Rate ................. 60% 61% 66% 81% 88% 110% 144% 120% 215% 94%(5)
Net Assets, End
of Period (in thousands) ................$60,772 $57,997 $50,964 $70,757 $61,825 $39,229 $27,862 $20,217 $12,407 $6,426
(1) The data presented has been restated to give effect to a 10 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) March 2, 1987 (inception) through October 31, 1987.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
(5) Annualized.
</TABLE>
Prospectus Financial Highlights 7
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "An Explanation of Fixed Income Securities Ratings" in the
Statement of Additional Information.
LIMITED-TERM TAX-EXEMPT FUND,
INTERMEDIATE-TERM TAX-EXEMPT FUND AND
LONG-TERM TAX-EXEMPT FUND
These funds, which seek to provide investors with income generally exempt
from federal income taxes, require a minimum initial investment of $5,000.
The three funds differ in the weighted average maturities of their
portfolios and accordingly in their degree of risk and level of income.
Generally, the longer the weighted average maturity, the higher the yield and
the greater the price volatility.
Limited-Term Tax-Exempt Fund invests primarily in shorter-term tax-exempt
bonds. The fund intends to maintain a weighted average portfolio maturity of
five years or less. This fund is designed for investors who can accept some
fluctuation in principal in order to earn a higher level of current income than
is generally available on tax-exempt money market securities.
Intermediate-Term Tax-Exempt Fund invests in tax-exempt bonds and, under
normal market conditions, will maintain a weighted average portfolio maturity of
three to 10 years. It is designed for investors seeking a higher level of
current income than is generally available on shorter-term tax-exempt bonds and
money market securities and who are willing to accept a greater degree of
fluctuation in principal.
Long-Term Tax-Exempt Fund invests in longer-term tax-exempt bonds and,
under normal market conditions, will maintain a weighted average portfolio
maturity of 10 years or greater. The fund is designed for the investor seeking a
higher level of current income and who can accept the relatively high degree of
price volatility associated with longer-term bonds.
As a fundamental policy, at least 80% of each fund's portfolio will consist
of securities whose income is not subject to federal income tax, including the
alternative minimum tax. All such securities must be accompanied by an opinion
of Counsel to the issuer that the income is not subject to federal income taxes.
See "Tax-Exempt Securities," page 10. Under normal market conditions,
Limited-Term Tax-Exempt Fund may invest up to 100% of its assets and
Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt Fund may invest up to
20% of their assets in shorter-term tax-exempt securities. For temporary
defensive purposes, Intermediate-Term Tax-Exempt Fund and Long-Term Tax-Exempt
Fund may invest 100% of their assets in such securities and all three funds may
invest up to 20% of assets in taxable shorter-term securities.
The tax-exempt funds may invest in securities that, at the time of
purchase, are rated by a nationally recognized statistical rating organization
or, if not rated, are of equivalent investment quality as determined by the
manager, as follows: short-term notes within the two highest categories [for
example, at least MIG-2 by Moody's Investors Services (Moody's) or SP-2 by
Standard & Poor's Corporation (S&P)]; bonds within the four highest categories
(for example, at least Baa by Moody's or BBB by S&P); other types of securities
rated at least P-2 by Moody's or A-2 by S&P. According to Moody's, bonds rated
Baa are medium-grade and possess some speculative characteristics. A BBB rating
by S&P indicates S&P's belief that a
8 Information Regarding the Funds American Century Investments
security exhibits a satisfactory degree of safety and capacity for repayment,
but is more vulnerable to adverse economic conditions or changing circumstances.
The manager will actively manage each portfolio, adjusting the average
maturity as necessary in response to expected changes in interest rates in
general and for tax-exempt securities specifically. During periods of rising
interest rates, the weighted average maturity of a fund may be moved to the
shorter end of its maturity range in order to reduce the effect of bond price
declines on the fund's net asset value. Conversely, when prevailing interest
rates are falling and bond prices are rising, the weighted average portfolio
maturity of a fund may be moved toward the longer end of its maturity range.
Tax-exempt securities are issued by states, territories and possessions of
the United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities. Interest on these securities is exempt from
federal income taxes and, in some instances, applicable state or local income
taxes. These securities are issued to obtain funds for various public purposes,
or for specified privately operated facilities.
From time to time, each fund may invest more than 25% of its assets in
tax-exempt securities which are related in such a way that an economic,
business, or political development or change affecting one such security could
also affect the other securities; for example, securities whose issuers are
located in the same state. Furthermore, each fund may invest up to 40% of its
assets in securities issued on behalf of educational facilities and 40% in
securities issued on behalf of qualified health facilities. To the extent that a
fund's assets are concentrated in securities payable from revenues on similar
facilities, the fund will be subject to the peculiar risks presented by such
facilities to a greater extent than it would if the fund's assets were not so
concentrated. Such facilities could be adversely affected by, among other
things, legislation, regulatory actions, a decline in public and private support
and increased competition.
FUNDAMENTALS OF FIXED INCOME INVESTING
HISTORICAL YIELDS
[line graph - graph data]
30 yr tr bd 20 yr tax-ex bd 3 mth trea bills
1/92 8% 6% 4%
2/92 8% 6% 4%
3/92 8% 6% 4%
4/92 8% 6% 4%
5/92 8% 6% 4%
6/92 8% 6% 4%
7/92 7% 6% 3%
8/92 7% 6% 3%
9/92 7% 6% 3%
10/92 8% 6% 3%
11/92 8% 6% 3%
12/92 7% 6% 3%
1/93 7% 6% 3%
2/93 7% 5% 3%
3/93 7% 6% 3%
4/93 7% 6% 3%
5/93 7% 6% 3%
6/93 7% 5% 3%
7/93 7% 5% 3%
8/93 6% 5% 3%
9/93 6% 5% 3%
10/93 6% 5% 3%
11/93 6% 5% 3%
12/93 6% 5% 3%
1/94 6% 5% 3%
2/94 7% 5% 3%
3/94 7% 6% 4%
4/94 7% 6% 4%
5/94 7% 6% 4%
6/94 8% 6% 4%
7/94 7% 6% 4%
8/94 7% 6% 5%
9/94 8% 6% 5%
10/94 8% 6% 5%
11/94 8% 7% 6%
12/94 8% 6% 6%
1/95 8% 6% 6%
2/95 7% 6% 6%
3/95 7% 6% 6%
4/95 7% 6% 6%
5/95 7% 6% 6%
6/95 7% 6% 6%
7/95 7% 6% 6%
8/95 7% 6% 5%
9/95 7% 6% 5%
10/95 6% 5% 6%
11/95 6% 5% 5%
12/95 6% 5% 5%
1/96 6% 5% 5%
2/96 6% 5% 5%
3/96 7% 6% 5%
4/96 7% 6% 5%
5/96 7% 6% 5%
6/96 7% 6% 5%
7/96 7% 6% 5%
8/96 7% 6% 5%
9/96 7% 6% 5%
10/96 7% 6% 5%
11/96 6% 6% 5%
12/96 7% 6%
BOND PRICE VOLATILITY
For a given change in interest rates, longer maturity bonds experience a
greater change in price, as shown below:
Price of a 7% Price of same
coupon bond bond if its Percent
Years to now trading yield increases change
Maturity to yield 7% to 8% in price
1 year $100.00 $99.06 -0.94%
3 years 100.00 97.38 -2.62%
10 years 100.00 93.20 -6.80%
30 years 100.00 88.69 -11.31%
YEARS TO MATURITY
[bar graph - graph data]
LIMITED-TERM TAX-EXEMPT
Likely Maturities of Individual Holdings 0-5 months
Expected Weighted Average Portfolio Maturity Range 6 mos.-6 years
INTERMEDIATE-TERM TAX-EXEMPT
Likely Maturities of Individual Holdings 0-20 years
Expected Weighted Average Portfolio Maturity Range 3-10 years
LONG-TERM TAX-EXEMPT
Likely Maturities of Individual Holdings 0-30 years
Expected Weighted Average Portfolio Maturity Range 10-20 years
Over time, the level of interest rates available in the marketplace
changes. As prevailing rates fall, the prices of bonds and other securities that
trade on a yield basis rise. On the other hand, when prevailing interest rates
rise, bond prices fall.
Generally, the longer the maturity of a debt security, the higher its yield
and the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds,
Prospectus Information Regarding the Funds 9
to change. If sustained over time, it would also have the impact of raising or
lowering the yield of the fund.
In addition to the risk arising from fluctuating interest rate levels, debt
securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond ratings
take into account the relative likelihood that such timely payment will occur.
As a result, lower-rated bonds tend to sell at higher yield levels than
top-rated bonds of similar maturity.
<TABLE>
<CAPTION>
AUTHORIZED QUALITY RANGES
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Limited-Term Tax-Exempt x x x x
Intermediate-Term Tax Exempt x x x x
Long-Term Tax-Exempt x x x x
</TABLE>
In addition, as economic, political and business developments unfold,
lower-quality bonds, which possess lower levels of protection with regard to
timely payment, usually exhibit more price fluctuation than do higher-quality
bonds of like maturity.
The investment practices of our fixed income funds take into account these
relationships. The maturity of each fund has implications for the degree of
price volatility and the yield level to be expected from each.
TAX-EXEMPT SECURITIES
Historically, interest paid on securities issued by states, cities,
counties, school districts and other political subdivisions of the United States
has been exempt from federal income taxes. Legislation since 1985, however,
affects the tax treatment of certain types of municipal bonds issued after
certain dates and, in some cases, subjects the income from certain bonds to
differing tax treatment depending on the tax status of its recipient.
The tax-exempt funds should be expected to invest some portion of their
assets in bonds which, in the hands of some holders, would be subject to the
alternative minimum tax, as long as management determines it is in the best
interest of shareholders generally to invest in such securities. See "Taxes,"
page 22.
As a prospective investor in tax-exempt securities, you should determine
whether your after-tax return is likely to be higher with a taxable or with a
tax-exempt security. To determine this, you may use the analysis shown in the
following example:
Suppose your maximum tax rate is 36% and you want to determine whether you
should purchase a 6% tax-exempt yield or a 9% taxable security.
6% 6%
----------------- = ------- = 9.375% taxable yield
1-.36 tax rate .64
Your after-tax return will be higher with the 6% tax-exempt yield if
taxable yields are less than 9.375%. In this example, the tax-exempt is more
attractive than the 9% taxable yield.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial
Highlights table on pages 5-7 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a particular fund's
objectives. The manager believes that the rate of portfolio turnover is
irrelevant when it determines a change is in order to achieve those objectives
and accordingly, the annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
REPURCHASE AGREEMENTS
While the funds are authorized to invest in repurchase agreements it is not
expected that they will regularly make such investments, because the
10 Information Regarding the Funds American Century Investments
interest earned on them typically is not tax-exempt. Repurchase agreements could
be used, however, if it is deemed in the best interest of the funds'
shareholders to invest in securities that are not exempt from federal income
taxes.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the funds' Board of Directors.
Each of the funds may invest in repurchase agreements with respect to any
security in which that fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such fund. No fund will invest more than 15% of its assets in
repurchase agreements maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depository receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a bond whose interest rate is indexed to the return on two-year
treasury securities would be a permissible investment (assuming it otherwise
meets the other requirements for the funds), while a security whose underlying
value is linked to the price of oil would not be a permissible investment since
the funds may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
Prospectus Information Regarding the Funds 11
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
board will review the manager's policy for investments in derivative securities
annually.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without the limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time the commitment to purchase is
made. Delivery of and payment for these securities typically occurs 15 to 45
days after the commitment to purchase. Market rates of interest on debt
securities at the time of delivery may be higher or lower than those contracted
for on the when-issued security. Accordingly, the value of each security may
decline prior to delivery, which could result in a loss to the fund. A separate
account for each fund consisting of cash or high-quality liquid debt securities
in an amount at least equal to the when-issued commitments will be established
and maintained with the custodian. No income will accrue to the fund prior to
delivery.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A security
that is illiquid. In such an event, the fund's manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
INTEREST RATE FUTURES CONTRACTS
AND OPTIONS THEREON
The funds may buy and sell interest rate futures contracts relating to debt
securities ("debt futures," i.e., futures relating to debt securities, and "bond
index futures," i.e., futures relating to indexes on types or groups of bonds)
and write and buy put and call options relating to interest rate futures
contracts.
For options sold, a fund will segregate cash or high-quality debt
securities equal to the value of securities underlying the option unless the
option is otherwise covered.
A fund will deposit in a segregated account with its custodian bank
high-quality debt obligations in an amount equal to the fluctuating market value
of long futures contracts it has purchased, less any margin deposited on its
long position. It may hold cash or acquire such debt obligations for the purpose
of making these deposits.
A fund will purchase or sell futures contracts and options thereon only for
the purpose of hedging against changes in the market value of its portfolio
12 Information Regarding the Funds American Century Investments
securities or changes in the market value of securities that it may wish to
include in its portfolio. A fund will enter into future and option transactions
only to the extent that the sum of the amount of margin deposits on its existing
futures positions and premiums paid for related options do not exceed 5% of its
assets.
Since futures contracts and options thereon can replicate movements in the
cash markets for the securities in which a fund invests without the large cash
investments required for dealing in such markets, they may subject a fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are (1) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (2) possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need for additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.
The manager will attempt to create a closely correlated hedge but hedging
activity may not be completely successful in eliminating market value
fluctuation. The ordinary spreads between prices in the cash and futures
markets, due to the differences in the natures of those markets, are subject to
distortion. Due to the possibility of distortion, a correct forecast of general
interest rate trends by the manager may still not result in a successful
transaction. The manager may be incorrect in its expectations as to the extent
of various interest rate movements or the time span within which the movements
take place.
See the Statement of Additional Information for further information about
these instruments and their risks.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield and
tax-equivalent yield.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. Yield is calculated by
adding over a 30-day (or one-month) period all interest and dividend income (net
of fund expenses) calculated on each day's market values, dividing this sum by
the average number of fund shares outstanding during the period, and expressing
the result as a percentage of the fund's share price on the last day of the
30-day (or one-month) period. The percentage is then annualized. Capital gains
and losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on your shares or the income reported
in a fund's financial statements.
A tax-equivalent yield demonstrates the taxable yield necessary to produce
an after-tax yield equivalent to that of a fund which invests in exempt
obligations. See "Tax-Exempt Securities," page 10, for a description of the
method of comparing yields and tax-equivalent yields.
The funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or Donoghue's Money Fund Report) and
Prospectus Information Regarding the Funds 13
publications that monitor the performance of mutual funds. Performance
information may be quoted numerically or may be presented in a table, graph or
other illustration. In addition, fund performance may be compared to well-known
indices of market performance including the Donoghue's Money Fund Average and
the Bank Rate Monitor National Index of 2 1/2-year CD rates. Fund performance
may also be compared, on a relative basis, to other funds in our fund family.
This relative comparison, which may be based upon historical or expected fund
performance, volatility or other fund characteristics, may be presented
numerically, graphically or in text. Fund performance may also be combined or
blended with other funds in our fund family, and that combined or blended
performance may be compared to the same indices to which individual funds may be
compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
14 Information Regarding the Funds American Century Investments
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 20.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $5,000. The minimum investment requirements may
be different for some types of retirement accounts. Call one of our Investor
Services Representatives for information on our retirement plans, which are
available for individual investors or for those investing through their
employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number.
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.
Prospectus How to Invest with American Century Investments 15
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central Time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see Automatic Investment Plan, this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 15 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your fund shares to our other funds up to six times per year per account. An
exchange request will be processed as of the same day it is received if it is
received before the funds' net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for funds issued by the
American Century Target Maturities Trust, and at the close of the Exchange for
all of our other funds. See "When Share Price is Determined," page 21.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges. See "When
Share Price is Determined," page 21.
16 How to Invest with American Century Investments American Century Investments
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line -- see page 18) if you
have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 18.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with a check for an amount you choose (minimum
$50). To set up a Check-A-Month plan, please call and request our Check-A-Month
brochure.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds to you or your
account at a bank or other financial institution. To set up automatic
redemptions, call one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Electronically transferred funds may be received up to seven days after
transmission. Wired funds are subject to a $10 fee to cover bank wire charges,
which is deducted from redemption proceeds. Once the funds are transmitted, the
time of receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value of the shares held in the account up to the minimum. If action is not
taken within 90 days of the letter's date,
Prospectus How to Invest with American Century Investments 17
the shares held in the account will be redeemed and the proceeds from the
redemption will be sent by check to your address of record. We reserve the right
to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee would be
required when:
o redeeming more than $25,000;
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week, at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indexes and view historical performance of your funds.
If you select "Full Services" on your application, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
CHECKWRITING
We offer CheckWriting as a service option for Limited-Term Tax-Exempt
accounts. CheckWriting allows you to redeem shares in your account by writing a
draft ("check") against your account balance. (Shares held in certificate form
may not be redeemed by check.) There is no limit on the number of checks you can
write, but each one must be for at least $100.
When you write a check, you will continue to receive dividends on all
shares until your check is presented for payment to our clearing bank. If you
redeem all shares in your account by check, any accrued distributions on the
redeemed shares will be paid to you in cash on the next monthly distribution
date.
If you want to add CheckWriting to an existing Limited-Term Tax-Exempt
account, contact us by phone or mail for an appropriate form. For a new account,
you may elect CheckWriting on your purchase application by choosing the "Full
Services" option. CheckWriting is not available for any account held in an IRA
or 403(b) plan.
CheckWriting redemptions may only be made on checks provided by us.
Currently, there is no charge for checks or for the CheckWriting service.
We will return checks drawn on insufficient funds or on funds from
investments made by any means other than by wire within the previous 15 days.
Neither the company nor our clearing bank will be
18 How to Invest with American Century Investments American Century Investments
liable for any loss or expenses associated with returned checks. Your account
may be assessed a $15 service charge for checks drawn on insufficient funds.
A stop payment may be ordered on a check written against your account. We
will use reasonable efforts to stop a payment, but we cannot guarantee that we
will be able to do so. If we are successful in fulfilling a stop-payment order,
your account may be assessed a $15 fee.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central Time are effective the same day,
and orders or cancellations received after 2 p.m. Central Time are effective the
next business day.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
Prospectus How to Invest with American Century Investments 19
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which are incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary. If you
own or are considering purchasing fund shares through an employer-sponsored
retirement plan, your ability to purchase shares of the funds, exchange them for
shares of other American Century funds, and redeem them will depend on the terms
of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
20 How to Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined at the close of
regular trading on each day that the New York Stock Exchange is open, usually 3
p.m. Central Time. The net asset values for the Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the time as of which
the net asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the funds' procedures or any contractual arrangement with the
funds or the funds' distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the funds are published in leading newspapers
daily. Net asset values may also be obtained by calling us or by accessing our
Web site (www.americancentury.com).
DISTRIBUTIONS
At the close of each day, including Saturdays, Sundays and holidays, net
income is determined and declared as a distribution. The distribution will be
paid monthly on the last Friday of each month, except for year-end
distributions, which will be paid on the last business day of the year.
Prospectus Additional Information You Should Know 21
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," this page. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but the funds may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code and Regulations, in all events in a manner consistent with the
provisions of the Investment Company Act.
Distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. Distribution
checks normally are mailed within seven days after the record date. Please
consult our Investor Services Guide for further information regarding your
distribution options.
TAXES
Each of the funds has elected to be taxed under Subchapter M of the
Internal Revenue Code, which means that to the extent its income is distributed
to shareholders, it pays no income taxes.
Dividends representing income derived from tax-exempt bonds generally
retain the bonds' tax-exempt character in a shareholder's hands. Distributions
which represent short-term capital gains are taxable as ordinary income.
Distributions from net long-term capital gains are taxable, as long-term capital
gains regardless of the length of time the shares on which such distributions
are paid have been held by the shareholder. However, you should note that any
loss realized upon the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of any distribution of
long-term capital gain to you with respect to such shares.
Distributions of capital gains are taxable to you regardless of whether
they are taken in cash or reinvested, even if the value of your shares is below
your cost. If you purchase shares shortly before a capital gain distribution,
you must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) will not have increased. In addition,
the share price at the time you purchase shares may include unrealized gains in
the securities held in the investment portfolio of the fund. If these portfolio
securities are subsequently sold and the gains are realized, they will, to the
extent not offset by capital losses, be paid to you as a distribution of capital
gains and will be taxable to you as short-term or long-term capital gains.
In January of the year following the distribution, we will send you a Form
1099-DIV notifying you of the status of your distributions for federal income
tax purposes. The tax-exempt funds anticipate that substantially all of the
dividends to be paid by the funds will be exempt from federal income taxes to an
individual unless, due to that person's own tax situation, he or she is subject
to the alternative minimum tax. In that case, it is likely that a portion of the
dividends will be taxable to that shareholder, while remaining tax-exempt in the
hands of most other shareholders. The funds will advise shareholders of the
percentage, if any, of the dividends not exempt from federal income tax, and the
percentage, if any, subject to the individual alternative minimum tax should a
shareholder be subject to it.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed, and is not refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received.
22 Additional Information You Should Know American Century Investments
Assuming that shareholders hold such shares as a capital asset, the gain or loss
will be a capital gain or loss and will generally be long term if shareholders
have held such shares for a period of more than one year. If a loss is realized
on the redemption of fund shares, the reinvestment in additional fund shares
within 30 days before or after the redemption may be subject to the "wash sale"
rules of The Code, resulting in a postponement of the recognition of such loss
for federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC.
The manager supervises and manages the investment portfolio of each fund
and directs the purchase and sale of their investment securities. It utilizes
teams of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The teams meet regularly to review
portfolio holdings and to discuss purchase and sale activity. The teams adjust
holdings in the funds' portfolios and the funds' asset mix as they deem
appropriate in pursuit of the funds' investment objectives. Individual portfolio
manager members of the teams may also adjust portfolio holdings of the funds or
of sectors of the funds as necessary between team meetings.
The portfolio manager members of the teams managing the funds described in
this Prospectus and their work experience for the last five years are as
follows:
COLLEEN M. DENZLER, Senior Municipal Portfolio Manager, joined the manager
in January 1996 and is a member of the team that manages the funds and eight
other Benham tax-exempt funds. Prior to joining the manager, Ms. Denzler was a
portfolio manager with the Calvert Group for 10 years, specializing in state
tax-exempt portfolios. Ms. Denzler is a Chartered Financial Analyst and is a
member of the Association for Investment Management and Research (AIMR) and The
Washington Society of Investment Analysts.
G. DAVID MACEWEN joined American Century in 1991 as a Senior Municipal
Portfolio Manager, and is a member of the teams that manage the Long-Term
Tax-Exempt Fund and five other Benham tax-exempt funds. Prior to joining the
manager, Mr. MacEwen was Vice President and Municipal Portfolio Manager with
Provident Institutional Management Corporation, Wilmington, Delaware.
JOEL SILVA joined American Century in 1989, serving first as a customer
service representative, then moving to a position as a municipal bond trader. As
a Municipal Portfolio Manager, Mr. Silva is a member of the teams that manage
six Benham tax-exempt funds, including the Limited-Term, Intermediate-Term and
Long-Term Tax-Exempt funds.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the funds, the manager receives an annual fee
of 0.60% of each of the funds.
On the first business day of each month, each fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for such fund by
the aggregate average daily closing value of each fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
Prospectus Additional Information You Should Know 23
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides facilities, equipment and personnel to the funds and is paid for
such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs. The manager
or an affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the funds, transactions in
shares of the funds may be executed by brokers or investment advisors who charge
a transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the funds or the
investment manager. You should be aware of the fact that these transactions may
be made directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
funds' investment manager. The manager pays all expenses for promoting and
distributing the funds.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-2021
(international calls: 816-531-5575).
American Century Mutual Funds issues 17 series of $.01 par value shares.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value
24 Additional Information You Should Know American Century Invesments
applicable to such share on all questions, except those matters which must be
voted on separately by the series or class of shares affected. Matters affecting
only one series or class are voted upon only by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the funds to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 25
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
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PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
TWENTIETH
CENTURY(R)
GROUP
New Opportunities
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
American Century Investments
Benham Group(R) American Century Group Twentieth Century Group
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
NEW OPPORTUNITIES
PROSPECTUS
MARCH 1, 1997
NEW OPPORTUNITIES
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. One of the funds from our
Twentieth Century Group that seeks capital growth is described in this
Prospectus. The investment objective is listed on page 2 of this Prospectus. The
other funds are described in separate prospectuses.
The fund is only available for purchase by participants in the American
Century Priority Investors Program and employees of the affiliated companies
comprising the American Century family of funds. The minimum initial investment
for Priority Investors in this fund is $10,000; the maximum investment is
$500,000. The manager intends to close the fund to new investors when the fund
reaches $400,000,000 in net assets.
SHARES OF THE FUND REDEEMED OR EXCHANGED WITHIN 5 YEARS OF THEIR PURCHASE
ARE SUBJECT TO A REDEMPTION FEE OF 2% OF THE VALUE OF THE SHARES REDEEMED OR
EXCHANGED. THIS REDEMPTION FEE IS RETAINED BY THE FUND.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419287
Kansas City, Missouri 64141-6287 o 1-800-345-8810
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
TWENTIETH CENTURY NEW OPPORTUNITIES FUND
New Opportunities Fund seeks capital growth. It pursues its investment
objective by investing primarily in common stocks that are considered by
management to have better-than-average prospects for appreciation.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective of the Fund American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund............................................2
Transaction and Operating Expense Table.....................................4
Financial Highlights........................................................5
INFORMATION REGARDING THE FUND
A Long-Term Investment......................................................6
Investment Policies of the Fund.............................................6
Investment Approach....................................................6
Investments in Smaller Companies.......................................6
Other Investment Practices,
Their Characteristics and Risks..........................................6
Foreign Securities.....................................................6
Forward Currency Exchange Contracts....................................7
Portfolio Turnover.....................................................8
Repurchase Agreements..................................................8
Derivative Securities..................................................8
Portfolio Lending......................................................9
When-Issued Securities.................................................9
Rule 144A Securities...................................................9
Short Sales...........................................................10
Performance Advertising....................................................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments...............................................11
Investing in American Century..............................................11
A Warning to Short-Term Investors..........................................11
How to Open an Account.....................................................11
By Mail...........................................................11
By Wire...........................................................11
By Exchange.......................................................12
In Person.........................................................12
Subsequent Investments................................................12
By Mail...........................................................12
By Telephone......................................................12
By Online Access..................................................12
By Wire...........................................................12
In Person.........................................................12
Automatic Investment Plan.............................................12
How to Exchange from One Account to Another................................13
By Mail...........................................................13
By Telephone......................................................13
By Online Access..................................................13
How to Redeem Shares.......................................................13
By Mail...........................................................13
By Telephone......................................................13
By Check-A-Month..................................................13
Other Automatic Redemptions.......................................13
Redemption Proceeds...................................................14
By Check..........................................................14
By Wire and ACH...................................................14
Special Requirements for Large Redemptions............................14
Redemption of Shares in Low-Balance Accounts..........................14
Signature Guarantee........................................................14
Special Shareholder Services...............................................15
Automated Information Line........................................15
Online Account Access.............................................15
Open Order Service................................................15
Tax-Qualified Retirement Plans....................................15
Important Policies Regarding Your Investments..............................16
Reports to Shareholders....................................................16
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price................................................................18
When Share Price Is Determined........................................18
How Share Price Is Determined.........................................18
Where to Find Information About Share Price...........................19
Distributions..............................................................19
Taxes ..................................................................19
Tax-Deferred Accounts.................................................19
Taxable Accounts......................................................19
Management.................................................................20
Investment Management.................................................20
Code of Ethics........................................................21
Transfer and Administrative Services..................................21
Distribution of Fund Shares................................................22
Further Information About American Century.................................22
Prospectus Table of Contents 3
<TABLE>
TRANSACTION AND OPERATING EXPENSE TABLE
New Opportunities
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C>
Maximum Sales Load Imposed on Purchases................................ none
Maximum Sales Load Imposed on Reinvested Dividends..................... none
Deferred Sales Load.................................................... none
Redemption Fee(1)...................................................... 2%(2)
Exchange Fee........................................................... none(2)
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees........................................................ 1.5%
12b-1 Fees............................................................. none
Other Expenses(3)...................................................... 0.00%
Total Fund Operating Expenses.......................................... 1.5%
EXAMPLE:
You would pay the following expenses on a 1 year $ 36
$1,000 investment, assuming a 5% annual return and 3 years 69
redemption at the end of each time period(2):
You would pay the following expenses on the 1 year $ 15
same investment, assuming no redemption: 3 years 47
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) Shares of the fund redeemed or exchanged within 5 years of their purchase
are subject to a redemption fee of 2% of the value of the shares redeemed
or exchanged. This redemption fee which is retained by the fund, is
intended to minimize the impact that shareholder short-term investment
behavior has on fund performance and hence, on the other shareholders of
the fund. See "A Warning for Short-Term Investors," page 10.
(3) Other expenses, which includes the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, are expected to be less than 0.01 of
1% of average net assets for the most recent fiscal year.
</TABLE>
The purpose of the table is to help you understand the various costs and
expenses that you, as an investor in the fund, will bear directly or indirectly.
The example set forth above assumes reinvestment of all dividends and
distributions and uses a 5% annual rate of return as required by Securities and
Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4 Transaction and Operating Expense Table American Century Investments
FINANCIAL HIGHLIGHTS
NEW OPPORTUNITIES
The Financial Highlights table below sets forth certain information
concerning the historic investment results of the fund pursuant to an
undertaking made by the fund at the time of its initial registration with the
SEC. The financial data included in the table which is unaudited, has been
derived from the financial statements contained in the Statement of Additional
Information. The information presented is for a share outstanding throughout the
period ended January 31, 1997.
1997(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period.................................... $5.00
-------
Income from Investment Operations
Net Realized and Unrealized (Loss) on Investment Transactions...... (.04)
-------
Net Asset Value, End of Period.......................................... $4.96
=======
Total Return(2)......................................................... (.80%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(3).................... 1.50%
Ratio of Net Investment Income to Average Net Assets(3)................. .94%
Portfolio Turnover Rate................................................. 9%
Average Commission Paid per Investment Security Traded.................. $.026
Net Assets, End of Period (in thousands)................................$103,338
(1) December 26, 1996 (Inception) through January 31, 1997 (Unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
A LONG-TERM INVESTMENT
An investment in the New Opportunities fund should be considered as a
long-term investment. The manager has adopted a number of policies regarding
investments in the fund to help ensure that prospective shareholders are willing
to make a long-term commitment to the fund before investing. These policies are
described under "A Warning for Short-term Investors", page 11. Those prospective
investors who do not want to, or are not able to, commit to leave their
investment in the fund for at least 5 years should not invest in the fund.
INVESTMENT POLICIES OF THE FUND
New Opportunities has adopted certain investment restrictions that are set
forth in the Statement of Additional Information. Those restrictions, as well as
the investment objective of the fund identified on page 2 of this Prospectus,
and any other investment policies designated as "fundamental" in this Prospectus
or in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
INVESTMENT APPROACH
New Opportunities seeks capital growth by investing in securities,
primarily common stocks, that meet certain fundamental and technical standards
of selection (primarily relating to accelerating earnings and revenues) and
have, in the opinion of the manager, better-than-average potential for
appreciation. So long as a sufficient number of such securities are available,
the fund intends to stay fully invested in these securities regardless of the
movement of stock prices generally. In most circumstances, the fund's actual
level of cash and cash equivalents will fluctuate between 0% and 10% of total
assets with 90% to 100% of its assets committed to equity and equity equivalent
investments.
INVESTMENTS IN SMALLER COMPANIES
New Opportunities presently intends to invest primarily in the equity
securities of smaller companies (although it can be expected that, as the fund
gets larger, it will begin to invest in medium size and larger companies). These
smaller companies may present greater opportunities for capital appreciation,
but may also involve greater risks than large, mature issuers. Such companies
may have limited product lines, markets or financial resources, and their
securities may trade less frequently and in more limited volume than the
securities of larger companies. In addition, available information regarding
these smaller companies may be less available and, when available, may be
incomplete or inaccurate. The securities of such companies may also be more
likely to be delisted from trading on their primary exchange. As a result, the
securities of smaller companies may experience significantly more price
volatility and less liquidity than securities of larger companies, and any
resulting volatility and limited liquidity will impact the net asset value of
the fund.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities of
foreign issuers, primarily from developed markets, when these securities meet
its standards of selection. The fund may make such investments either directly
in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign
securities. DRs are securities listed on exchanges or
6 Information Regarding the Funds American Century Investments
quoted in the over-the-counter market in one country but represent the shares of
issuers domiciled in other countries. DRs may be sponsored or unsponsored.
Direct investments in foreign securities may be made either on foreign
securities exchanges or in the over-the-counter markets.
The fund may invest in common stocks, convertible securities, preferred
stocks, bonds, notes and other debt securities of foreign issuers, and debt
securities of foreign governments and their agencies. The fund will limit its
purchase of debt securities to investment grade obligations.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the fund may be denominated in
foreign currencies. Other securities, such as DRs, may be denominated in U.S.
dollars, but have a value that is dependent on the performance of a foreign
security, as valued in the currency of its home country. As a result, the value
of the fund's portfolio may be affected by changes in the exchange rates between
foreign currencies and the U.S. dollar, as well as by changes in the market
values of the securities themselves. The performance of foreign currencies
relative to the U.S. dollar may be a factor in the overall performance of the
fund.
To protect against adverse movements in exchange rates between currencies,
the fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where it would be obligated to deliver an amount
of foreign currency in excess of the aggregate value of its portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the fund will enter
into portfolio hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund,
when required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of the
fund's assets will be committed to a segregated account in connection with
portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the fund against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
Prospectus Information Regarding the Funds 7
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of the fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by the fund since short-term capital
gains are taxable as ordinary income.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions present
an attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The fund will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the fund's Board of Directors.
The fund will invest no more than 15% of its assets in repurchase
agreements maturing in more than seven days.
DERIVATIVE SECURITIES
The fund may invest in securities that are commonly referred to as
"derivative" securities. Generally, a derivative is a financial arrangement the
value of which is based on, or "derived" from, a traditional security, asset, or
market index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
The fund may not invest in a derivative security unless the reference index
or the instrument to which it relates is an eligible investment for the fund.
For example, a security whose underlying value is linked to the price of oil
would not be a permissible investment because the fund may not invest in oil and
gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
8 Information Regarding the Funds American Century Investments
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued
basis without limit when, in the opinion of the manager, such purchases will
further the investment objectives of the fund. The price of when-issued
securities is established at the time commitment to purchase is made. Delivery
of and payment for these securities typically occur 15 to 45 days after the
commitment to purchase. Market rates of interest on debt securities at the time
of delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of such security may decline prior to delivery,
which could result in a loss to the fund. A separate account for the fund
consisting of cash or high-quality liquid debt securities in an amount at least
equal to the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and the fund may, from time to time, hold a Rule 144A
security that is illiquid. In such an event, the fund's manager will consider
appropriate remedies to minimize the effect on the fund's liquidity. The fund
Prospectus Information Regarding the Funds 9
may not invest more than 15% of its assets in illiquid securities (securities
that may not be sold within seven days at approximately the price used in
determining the net asset value of fund shares).
SHORT SALES
The fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns
at a current attractive price, but also wishes to defer recognition of gain or
loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code.
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
The fund may also include in advertisements data comparing performance with
the performance of non-related investment media, published editorial comments
and performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which the fund may be compared.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
10 Information Regarding the Funds American Century Investments
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The New Opportunities Fund is a part of the American Century Investments
family of mutual funds. Our family provides a full range of investment
opportunities, from the aggressive equity growth funds in our Twentieth Century
Group, to the fixed income funds in our Benham Group, to the moderate risk and
specialty funds in our American Century Group. Please call 1-800-345-8810 for a
brochure or prospectuses for the other funds in the American Century Investments
family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
A WARNING TO SHORT-TERM INVESTORS
In order to protect the fund's performance potential, it is the desire of
the manager that only investors that intend to leave their money in the fund for
the long term, i.e., for more than five years, actually invest in the fund. Two
policies have been adopted to highlight for potential investors that an
investment in the fund should be viewed as a long-term commitment. First, the
minimum initial investment for the fund is $10,000. Second, shares that are
redeemed or exchanged within 5 years of their purchase will be subject to a
redemption fee of 2% of the value of the shares redeemed or exchanged. This fee
will be retained by the fund to help minimize the impact such redemptions and
exchanges have on fund performance and, hence, on the other shareholders of the
fund.
BECAUSE OF THE SIGNIFICANT NEGATIVE IMPACT THAT THE FEE WILL HAVE ON
REDEMPTIONS OR EXCHANGES MADE WITHIN FIVE YEARS OF PURCHASE, THOSE PROSPECTIVE
INVESTORS WHO DO NOT WANT TO, OR ARE NOT ABLE TO, COMMIT TO LEAVE THEIR
INVESTMENT IN THE FUND FOR AT LEAST FIVE YEARS SHOULD NOT INVEST IN THE FUND.
HOW TO OPEN AN ACCOUNT
Shares of the fund are only available for purchase by participants in our
Priority Investors Program and employees of the affiliated companies comprising
the American Century family of funds.
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum initial investment for Priority Investors in this fund is
$10,000; the maximum aggregate investment in the fund is $500,000. Any increase
in value as a result of share price appreciation and distributions from the fund
that are reinvested in the fund do not count against this $500,000 maximum.
The manager currently intends to close the fund to new investors when the
fund reaches $400,000,000 in net assets.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
Prospectus How to Invest with American Century Investments 11
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number.
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.
BY EXCHANGE
Call 1-800-345-8810 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
page 12 for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see Automatic Investment Plan, this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.
BY ONLINE ACCESS
Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 10 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.
12 How to Invest with American Century Investments American Century Investments
HOW TO EXCHANGE FROM
ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your fund shares to our other funds up to six times per year per account. An
exchange request will be processed as of the same day it is received, if it is
received before the fund's net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for funds issued by the
American Century Target Maturities Trust, and at the close of the Exchange for
all of our other funds. See "When Share Price is Determined," page 18.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
EXCHANGES OF SHARES MADE WITHIN 5 YEARS OF THEIR PURCHASE WILL BE SUBJECT
TO A REDEMPTION FEE OF 2% OF THE VALUE OF THE SHARES EXCHANGED. SEE "A WARNING
TO SHORT-TERM INVESTORS," PAGE 11.
If, in any 90-day period, the total of your exchanges and your redemptions
from any one account exceeds the lesser of $250,000 or 1% of the fund's assets,
further exchanges will be subject to special requirements to comply with our
policy on large redemptions. See "Special Requirements for Large Redemptions,"
page 14.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line -- see page 15) if you
have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-8810
to get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-8810 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received. For large redemptions, please read "Special Requirements for Large
Redemptions," page 14.
REDEMPTION OF SHARES MADE WITHIN 5 YEARS OF THEIR PURCHASE WILL BE SUBJECT
TO A REDEMPTION FEE OF 2% OF THE VALUE OF THE SHARES REDEEMED. SEE "A WARNING TO
SHORT-TERM INVESTORS," PAGE 11.
Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 14.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with a check for an amount you choose (minimum
$50). To set up a Check-A-Month plan or request a brochure, please call an
Investor Services Representative.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds to your account
Prospectus How to Invest with American Century Investments 13
at a bank or other financial institution. To set up automatic redemptions, call
one of our Investor Services Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule 18f-1 under the Investment Company
Act, which obligates each fund make certain redemptions in cash. This
requirement to pay redemptions in cash applies to situations where one
shareholder redeems, during any 90-day period, up to the lesser of $250,000 or
1% of the assets of the fund. Although redemptions in excess of this limitation
will also normally be paid in cash, we reserve the right under unusual
circumstances to honor these redemptions by making payment in whole or in part
in readily marketable securities (a "redemption-in-kind").
If payment is made in securities, the securities will be selected by the
fund, will be valued in the same manner as they are in computing the fund's net
asset value and will be provided without prior notice.
If your redemption would exceed this limit and you would like to avoid
being paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
Despite its right to redeem fund shares through a redemption-in-kind, we do
not expect to exercise this option unless the fund has an unusually low level of
cash to meet redemptions and/or is experiencing unusually strong demands for its
cash. Such a demand might be caused, for example, by extreme market conditions
that result in an abnormally high level of redemption requests concentrated in a
short period of time. Absent these or similar circumstances, we expect
redemptions in excess of $250,000 to be paid in cash in any fund with assets of
more than $50 million if total redemptions from any one account in any 90-day
period do not exceed one-half of 1% of the total assets of the fund.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value of the shares held in the account up to the minimum. If action is not
taken within 90 days of the letter's date, the shares held in the account will
be redeemed and the proceeds from the redemption will be sent by check to your
address of record. We reserve the right to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee would be
required when:
o redeeming more than $25,000; or
14 How to Invest with American Century Investments American Century Investments
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week, at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indices and view historical performance of your funds.
If you select "Full Services" on your application, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
The fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
o Individual Retirement Accounts (IRAs); or
o 403(b) plans.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
Prospectus How to Invest with American Century Investments 15
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for
a period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment
requirements, including those that relate to purchases, transfers and
redemptions. In addition, we may also alter, add to or terminate any
investor services and privileges. Any changes may affect all shareholders
or only certain series or classes of shareholders. In particular, the
manager has established different minimum investment amounts for the
employees of its affiliated companies, and may change those amounts from
time to time.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open
orders, will be refused. Once you have mailed or otherwise transmitted
your transaction instructions to us, they may not be modified or
canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These
procedures are designed to protect shareholders from unauthorized or
fraudulent instructions. If we do not employ reasonable procedures to
confirm the genuineness of instructions, then we may be liable for losses
due to unauthorized or fraudulent instructions. The company, its transfer
agent and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase
in the number of shareholder telephone calls. If you experience
difficulty in reaching us during such periods, you may send your
transaction instructions by mail, express mail or courier service, or you
may visit one of our Investors Centers. You may also use our Automated
Information Line if you have requested and received an access code and
are not attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error
16 How to Invest with American Century Investments American Century Investments
with reasonable promptness, i.e., within 30 days of non-automatic transactions
or within 30 days of the date of your consolidated quarterly statement, in the
case of automatic transactions, we will deem you to have ratified the
transaction.
No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund. The annual report includes audited financial statements and a list of
portfolio securities as of the fiscal year end. The semiannual report includes
unaudited financial statements for the first six months of the fiscal year, as
well as a list of portfolio securities at the end of the period. You also will
receive an updated prospectus at least once each year. Please read these
materials carefully, as they will help you understand your fund.
Prospectus How to Invest with American Century Investments 17
ADDITIONAL INORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents before the time as of which the net
asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined as of, the close
of the Exchange on, the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on a bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. If no sale is reported, the mean of the latest bid and asked
price is used. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
18 Additional Information You Should Know American Century Investments
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of the fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of New Opportunities are published in leading
newspapers daily. The net asset value may also be obtained by calling us or by
accessing our Web site (www.americancentury.com).
DISTRIBUTIONS
In general, distributions from net investment income and net realized
securities gains, if any, are declared and paid annually on or before December
31, but the fund may make distributions on a more frequent basis to comply with
the distribution requirements of the Internal Revenue Code, in all events in a
manner consistent with the provisions of the Investment Company Act.
Distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. You may elect to
have distributions on shares held in Individual Retirement Accounts and 403(b)
plans paid in cash only if you are at least 591/2 years old or permanently and
totally disabled. Distribution checks normally are mailed within seven days
after the record date. Please consult our Investor Services Guide for further
information regarding your distribution options.
A distribution on shares of the fund does not increase the value of your
shares or your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
fund expenses.
Because such gains and dividends are included in the value of your shares,
when they are distributed the value of your shares is reduced by the amount of
the distribution. If you buy your shares just before the distribution, you will
pay the full price for your shares, and then receive a portion of the purchase
price back as a taxable distribution. See "Taxes," this page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless of the length of time you have held the
shares on which such distributions are paid. However, you should note that any
loss realized upon the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of any distribution of
long-term capital gain to you with respect to such shares.
Dividends and interest received by the fund on foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Foreign countries gen-
Prospectus Additional Information You Should Know 19
erally do not impose taxes on capital gains in respect of investments by
non-resident investors. The foreign taxes paid by the fund will reduce its
dividends.
If more than 50% of the value of the fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by you.
If the fund purchases the securities of certain foreign investment funds or
trusts called passive foreign investment companies, capital gains on the sale of
such holdings will be deemed to be ordinary income regardless of how long the
fund holds its investment. The fund may also be subject to corporate income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed, and is not refundable.
Redemption of shares of the fund (including redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the fund. Acting pursuant
to an investment management agreement entered into with the
20 Additional Information You Should Know American Century Investments
fund, American Century Investment Management, Inc. serves as the investment
manager of the fund. Its principal place of business is American Century Tower,
4500 Main Street, Kansas City, Missouri 64111. The manager has been providing
investment advisory services to investment companies and institutional clients
since it was founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC will be providing investment management services to funds
managed by the manager, while certain employees of the manager will be providing
investment management services to funds managed by BMC.
The manager supervises and manages the investment portfolios of the fund
and directs the purchase and sale of its investment securities. It utilizes a
team of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the fund. The team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the fund's portfolios as it deems appropriate in pursuit of the
fund's investment objectives. Individual portfolio manager members of the team
may also adjust portfolio holdings of the fund as necessary between team
meetings.
The portfolio manager members of the team managing New Opportunities Fund
and their work experience for the last five years are as follows:
GLENN A. FOGLE, Vice President and Portfolio Manager, joined American
Century in September 1990 as an Investment Analyst, a position he held until
March 1993. At that time he was promoted to Portfolio Manager.
JOHN D. SEITZER, Portfolio Manager, joined American Century in June 1993 as
an Investment Analyst, a position he held until July 1996. At that time he was
promoted to Portfolio Manager. Prior to joining American Century, Mr. Seitzer
attended Indiana University from August 1991 to June 1993, where he obtained his
MBA degree.
The activities of the manager are subject only to directions of the fund's
Board of Directors. The manager pays all the expenses of the fund except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager receives an annual fee
of 1.5% of the average net assets the fund.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the rate specified. The fee for the
previous month is calculated by multiplying the applicable fee for such series
by the aggregate average daily closing value of the series' net assets during
the previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the fund.
It provides facilities, equipment and personnel to the fund, and is paid for
such services by the manager.
Although there is no sales charge levied by the fund, transactions in
shares of the fund may be executed by brokers or investment advisors who charge
a transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
Prospectus Additional Information You Should Know 21
by the broker-dealer or financial advisor and not remitted to the fund or the
investment manager. You should be aware of the fact that these transactions may
be made directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the fund's Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the fund's investment
manager. The manager pays all expenses for promoting sales of, and distributing
the fund.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the fund, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the fund is American Century Tower, 4500 Main
Street, P.O. Box 419287, Kansas City, Missouri 64141-6287. All inquiries may be
made by mail to that address, or by phone to 1-800-345-8810 (international
calls: 816-531-5575).
New Opportunities, which is first being offered by this Prospectus, is one
of 17 series of $.01 par value shares issued by American Century Mutual Funds,
Inc. Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters which must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
22 Additional Information You Should Know American Century Investments
NOTES
Notes 23
NOTES
24 Notes American Century Investments
NOTES
Notes 25
P.O. Box 419287
Kansas City, Missouri
64141-6287
Person-to-person assistance:
1-800-345-8810 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-531-5689
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7807 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
TWENTIETH
CENTURY(R)
GROUP
Select
Heritage
Growth
Ultra
Vista
ADVISOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your needs, American Century funds have been
divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.
American Century Investments
Benham Group(R) American Century Group Twentieth Century Group
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Select o Heritage o Growth
Ultra o Vista
PROSPECTUS
MARCH 1, 1997
Select o Heritage o Growth
Ultra o Vista
ADVISOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century Investments, a
family of funds that includes nearly 70 no-load and low-load mutual funds
covering a variety of investment opportunities. Five of the funds from our
Twentieth Century Group that invest primarily in equity securities are described
in this Prospectus. Their investment objectives are listed on page 2 of this
Prospectus. The other funds are described in separate prospectuses.
Each fund's shares offered in this Prospectus (the Advisor Class shares) are
sold at their net asset value with no sales charges or commissions. The Advisor
Class shares are subject to Rule 12b-1 shareholder services and distribution
fees as described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY - TWENTIETH CENTURY SELECT FUND
AMERICAN CENTURY - TWENTIETH CENTURY HERITAGE FUND
The Select and Heritage funds seek capital growth. The funds intend to pursue
their investment objectives by investing primarily in common stocks of companies
that are considered by management to have better-than-average prospects for
appreciation. As a matter of fundamental policy, 80% of the assets of Select and
Heritage must be invested in securities of companies that have a record of
paying dividends or have committed themselves to the payment of regular
dividends, or otherwise produce income.
AMERICAN CENTURY - TWENTIETH CENTURY GROWTH FUND
AMERICAN CENTURY - TWENTIETH CENTURY ULTRA FUND
AMERICAN CENTURY - TWENTIETH CENTURY VISTA FUND
The Growth, Ultra and Vista funds seek capital growth. The funds intend to
pursue their investment objectives by investing primarily in common stocks that
are considered by management to have better-than-average prospects for
appreciation.
There is no assurance that the funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds.............................2
Transaction and Operating Expense Table........................4
Financial Highlights...........................................5
Performance Information of Other Class.........................7
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds...............................12
Growth Equity Funds.......................................12
Select and Heritage ......................................12
Growth, Ultra and Vista ..................................12
Other Investment Practices, Their Characteristics
and Risks...................................................13
Foreign Securities........................................13
Forward Currency Exchange Contracts.......................13
Portfolio Turnover.............................................14
Repurchase Agreements.....................................14
Derivative Securities.....................................15
Portfolio Lending.........................................15
When-Issued Securities....................................16
Rule 144A Securities......................................16
Short Sales...............................................16
Performance Advertising........................................16
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American
Century Funds...............................................18
How to Exchange Your Investment from One
American Century Fund to Another............................18
How to Redeem Shares...........................................18
Special Requirements for Large Redemptions................18
Telephone Services.............................................19
Investors Line............................................19
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price....................................................20
When Share Price Is Determined............................20
How Share Price Is Determined.............................20
Where to Find Information About Share Price...............21
Distributions..................................................21
Taxes..........................................................21
Tax-Deferred Accounts.....................................21
Taxable Accounts..........................................21
Management.....................................................23
Investment Management.....................................23
Code of Ethics............................................24
Transfer and Administrative Services......................24
Distribution of Fund Shares....................................24
Service and Distribution Fees..................................25
Further Information About American Century.....................25
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Select, Heritage,
Growth, Ultra, Vista
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases.................................none
Maximum Sales Load Imposed on Reinvested Dividends......................none
Deferred Sales Load.....................................................none
Redemption Fee..........................................................none
Exchange Fee............................................................none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees........................................................0.75%
12b-1 Fees(1)..........................................................0.50%
Other Expenses(2). ....................................................0.00%
Total Fund Operating Expenses. ........................................1.25%
EXAMPLE
You would pay the following expenses on a 1 year $ 13
$1,000 investment, assuming a 5% annual return and 3 years 40
redemption at the end of each time period: 5 years 68
10 years 150
(1) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the manager, and a portion is used to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page 25.
(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the funds offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Advisor Class shares. The funds offer
three other classes of shares, one of which is primarily made available to
retail investors and two that are primarily made available to institutional
investors. The other classes have different fee structures than the Advisor
Class. The difference in the fee structures among the classes is the result of
their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. Accordingly, the core investment advisory expenses
do not vary by class. A difference in fees will result in different performance
for those classes. For additional information about the various classes, see
"Further Information About American Century," page 25.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ULTRA
The Advisor Class of the fund commenced operations on October 2, 1996.
Performance information of the original class of shares, which commenced
operations on November 2, 1981, is presented on page 10.
The Financial Highlights for the period presented have been audited by Baird,
Kurtz & Dobson, independent certified public accountants, whose report thereon
appears in the funds' annual report, which is incorporated by reference into the
Statement of Additional Information. The annual report contains additional
performance information and will be made available upon request and without
charge. The information presented is for a share outstanding throughout the
period ended October 31, 1996.
1996(1)
PER-SHARE DATA
<S> <C>
Net Asset Value, Beginning of Period.................................................$29.55
Income from Investment Operations
Net Investment (Loss)...............................................................(.02)(2)
Net Realized and Unrealized (Loss) on Investment Transactions.......................(.01)
------------
Total from Investment Operations....................................................(.03)
------------
Net Asset Value, End of Period.......................................................$29.52
============
Total Return(3).....................................................................(.10)%
- ------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets....................................1.25%(4)
Ratio of Net Investment (Loss) to Average Net Assets.................................(.8)%(4)
Portfolio Turnover Rate...................................................................87%
Average Commission Paid per Investment Security Traded..................................$.035
Net Assets, End of Period (in millions)...................................................$13
(1) October 2, 1996 (Commencement of sale of the Advisor Class) through October
31, 1996.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
VISTA
The Advisor Class of the fund commenced operations on October 2, 1996.
Performance information of the original class of shares, which commenced
operations on November 25, 1983, is presented on page 11.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the funds' annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the period ended October 31, 1996.
1996(1)
PER-SHARE DATA
<S> <C>
Net Asset Value, Beginning of Period.................................................$16.87
Income from Investment Operations
Net Investment (Loss)...............................................................(.02)(2)
Net Realized and Unrealized (Loss) on Investment Transactions......................(1.18)
------------
Total from Investment Operations...................................................(1.20)
------------
Net Asset Value, End of Period.......................................................$15.67
============
Total Return(3)....................................................................(7.11)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets......................................1.25%(4)
Ratio of Net Investment (Loss) to Average Net Assets..................................(1.2)%(4)
Portfolio Turnover Rate...................................................................91%
Average Commission Paid per Investment Security Traded..................................$.028
Net Assets, End of Period (in millions)....................................................$6
(1) October 2, 1996 (Commencement of sale of the Advisor Class) through October
31, 1996.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
</TABLE>
6 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
SELECT
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's original class of shares, which was
redesignated the "Investor Class" of shares, effective September 3, 1996. The
Investor Class shares have a total expense ratio that is 0.25% lower than the
Advisor Class. Had the Advisor Class been in existence for the time periods
presented, that class's performance information would be lower as a result of
the additional expense.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the funds' annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ......................... $39.52 $37.67 $45.76 $39.18 $40.79 $34.19 $35.98 $27.85 $32.69 $35.40
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income .................. .20(1) .33(1) .40 .46 .53 .63 .62 1.10 .64 .33
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ...... 6.73 4.68 (3.59) 7.94 .34 8.17 (1.29) 7.74 1.37 .80
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From
Investment Operations .................. 6.93 5.01 (3.19) 8.40 .87 8.80 (.67) 8.84 2.01 1.13
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............. (.27) (.281) (.432) (.495) (.653) (.652) (1.116) (.707) (.481) (.380)
From Net Realized Gains on
Investment Transactions ................ (4.66) (2.750) (4.466) (1.313) (1.823) (1.551) -- -- (6.367) (3.462)
In Excess of Net Realized Gains ........ -- (.125) -- (.016) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions .................... (4.93) (3.156) (4.898) (1.824) (2.476) (2.203) (1.116) (.707) (6.848) (3.842)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year .............. $41.52 $39.52 $37.67 $45.76 $39.18 $40.79 $34.19 $35.98 $27.85 $32.69
======= ====== ====== ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ........................ 19.76% 15.02% (7.37)% 22.20% 1.76% 27.05% (2.03)% 32.59% 7.31% 3.47%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
to Average Net Assets .................. .5% .9% 1.0% 1.1% 1.4% 1.7% 1.8% 3.4% 2.2% 1.1%
Portfolio Turnover Rate ................ 105% 106% 126% 82% 95% 84% 83% 93% 140% 123%
Average Commission Paid per
Investment Security Traded ............. $.041 $.046 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) .................. $4,039 $4,008 $4,278 $5,160 $4,534 $4,163 $2,953 $2,721 $2,367 $2,417
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 7
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
HERITAGE
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's original class of shares, which was
redesignated the "Investor Class" of shares, effective September 3, 1996. The
Investor Class shares have a total expense ratio that is 0.25% lower than the
Advisor Class. Had the Advisor Class been in existence for the fund for the time
periods presented, the fund's performance information would be lower as a result
of the additional expense.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the funds' annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period ....................... $11.75 $10.32 $11.03 $9.30 $8.59 $6.55 $8.15 $6.21 $5.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income .................. --(2) .05(2) .07 .07 .10 .11 .10 .08 .06
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ...... 1.15 1.96 (.21) 2.43 .72 2.04 (.94) 1.93 1.16
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ....... 1.15 2.01 (.14) 2.50 .82 2.15 (.84) 2.01 1.22
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............. (.05) (.033) (.068) (.093) (.113) (.110) (.065) (.066) (.013)
From Net Realized Gains on
Investment Transactions ................ (.61) (.514) (.500) (.679) -- -- (.691) -- --
In Excess of Net Realized Gains ........ -- (.030) (.006) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions .................... (.66) (.577) (.574) (.772) (.113) (.110) (.756) (.066) (.013)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............ $12.24 $11.75 $10.32 $11.03 $9.30 $8.59 $6.55 $8.15 $6.21
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3) ........................ 10.44% 21.04% (1.13)% 28.64% 9.65% 33.25% (11.62)% 32.65% 25.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. .99% .99% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net Investment Income
to Average Net Assets .................. -- .5% .7% .7% 1.1% 1.5% 1.6% 1.3% 1.4%(4)
Portfolio Turnover Rate ................ 122% 121% 136% 116% 119% 146% 127% 159% 130%(4)
Average Commission Paid per
Investment Security Traded ............. $.042 $.042 --(5) --(5) --(5) --(5) --(5) --(5) --(5)
Net Assets, End
of Period (in millions) ................ $1,083 $1,008 $897 $702 $369 $269 $199 $117 $55
(1) November 10, 1987 (inception) through October 31, 1988
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total return for periods less than one year are not
annualized.
(4) Annualized.
(5) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
8 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
GROWTH
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's original class of shares, which was
redesignated the "Investor Class" of shares, effective September 3, 1996. The
Investor Class shares have a total expense ratio that is 0.25% lower than the
Advisor Class. Had the Advisor Class been in existence for the fund for the time
periods presented, the fund's performance information would be lower as a result
of the additional expense.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the funds' annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Year ........................ $23.88 $22.99 $25.27 $23.64 $22.32 $14.81 $17.44 $12.54 $15.62 $19.47
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) .......... (.01)(1) .08(1) .06 .06 (.02) .04 .09 .08 .30 .01
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 1.47 4.08 .48 1.94 1.35 8.47 (2.05) 5.14 .13 1.30
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 1.46 4.16 .54 2.00 1.33 8.51 (1.96) 5.22 .43 1.31
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ (.07) (.051) (.056) -- (.013) (.111) (.079) (.320) (.046) (.086)
From Net Realized Gains
on Investment Transactions ............ (2.98) (3.183) (2.764) (.353) -- (.891) (.592) -- (3.460) (5.076)
In Excess of Net Realized Gains ....... (.08) (.040) (.002) (.013) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (3.13) (3.274) (2.822) (.366) (.013) (1.002) (.671) (.320) (3.506) (5.162)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $22.21 $23.88 $22.99 $25.27 $23.64 $22.32 $14.81 $17.44 $12.54 $15.62
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 8.18% 22.31% 2.66% 8.48% 5.96% 60.64% (11.72)% 42.74% 3.18% 9.32%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.1)% .4% .3% .2% (.1)% .2% .6% .5% 2.4% .2%
Portfolio Turnover Rate ............... 122% 141% 100% 94% 53% 69% 118% 98% 143% 114%
Average Commission Paid per
Investment Security Traded ............ $.0360 $.040 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $4,765 $5,130 $4,363 $4,641 $4,472 $3,193 $1,697 $1,597 $1,229 $1,188
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 9
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
ULTRA
The original class of shares of Ultra were designated the "Investor Class"
effective September 3, 1996. The financial information in the following table
reflects the performance of the fund's Investor Class of shares for the last ten
fiscal years. Investor Class shares have a total expense ratio that is 0.25%
lower than the Advisor Class shares offered by this Prospectus. Had the Advisor
Class shares been in existence for the fund for the time periods presented, the
performance results for that class would be lower as a result of the additional
expense.
The performance information for each of the periods presented have been audited
by Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for an Investor Class share
outstanding throughout the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Year ........................ $28.03 $21.16 $21.61 $15.46 $15.53 $7.73 $9.63 $6.86 $8.76 $9.06
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) ......... (.05)(1) (.07)(1) (.03) (.09) (.05) (.03) (.03) .19 (.02) (.07)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 2.84 7.58 (.42) 6.24 (.02) 7.86 (.73) 2.58 1.38 (.22)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 2.79 7.51 (.45) 6.15 (.07) 7.83 (.76) 2.77 1.36 (.29)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ -- -- -- -- -- -- (.196) -- -- (.007)
From Net Realized Gains on
Investment Transactions ............... (1.19) (.645) -- -- -- (.028) (.947) -- (3.258) --
In Excess of Net Realized Gains ....... (.11) -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (1.30) (.645) -- -- -- (.028) (1.143) -- (3.258) (.007)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $29.52 $28.03 $21.16 $21.61 $15.46 $15.53 $7.73 $9.63 $6.86 $8.76
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 10.79% 36.89% (2.08)% 39.78% (.45)% 101.51% (9.02)% 40.37% 19.52% (3.23)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.2)% (.3)% (.1)% (.6)% (.4)% (.5)% (.3)% 2.2% (.3)% (.5)%
Portfolio Turnover Rate ............... 87% 87% 78% 53% 59% 42% 141% 132% 140% 137%
Average Commission Paid per
Investment Security Traded ............ $.0350 $.033 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $18,266 $14,376 $10,344 $8,037 $4,275 $2,148 $330 $347 $258 $236
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
10 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
VISTA
The original class of shares of Vista were designated the "Investor Class"
effective September 3, 1996. The financial information in the following table
reflects the performance of the fund's Investor Class of shares for the last ten
fiscal years. Investor Class shares have a total expense ratio that is 0.25%
lower than the Advisor Class shares offered by this Prospectus. Had the Advisor
Class shares been in existence for the fund for the time periods presented, the
performance results for that class would be lower as a result of the additional
expense.
The performance information for each of the periods presented have been audited
by Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for an Investor Class share
outstanding throughout the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Year ........................ $15.73 $10.94 $12.24 $11.01 $10.53 $6.28 $8.74 $5.91 $5.73 $6.88
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) .......... (.11)(1) (.08)(1) (.08) (.07) (.04) (.02) (.01) (.03) .01 (.05)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 1.09 4.90 .45 1.95 .52 4.27 (1.76) 2.87 .63 (.45)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... .98 4.82 .37 1.88 .48 4.25 (1.77) 2.84 .64 (.50)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ -- -- -- -- -- -- -- (.012) -- --
From Net Realized Gains
on Investment Transactions ............ (1.02) (.030) (1.663) (.641) -- -- (.693) -- (.462) (.651)
In Excess of Net Realized Gains ....... (.01) -- (.012) (.006) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (1.03) (.030) (1.675) (.647) -- -- (.693) (.012) (.462) (.651)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $15.68 $15.73 $10.94 $12.24 $11.01 $10.53 $6.28 $8.74 $5.91 $5.73
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 6.96% 44.20% 4.16% 17.71% 4.55% 67.67% (22.17)% 48.19% 11.41% (7.70)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. .99% .98% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.7)% (.6)% (.8)% (.6)% (.4)% (.3)% (.1)% (.4)% .2% (.7)%
Portfolio Turnover Rate ............... 91% 89% 111% 133% 87% 92% 103% 125% 145% 123%
Average Commission Paid per
Investment Security Traded ............ $.028 $.033 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $2,276 $1,676 $792 $847 $830 $622 $341 $264 $206 $187
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 11
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth in the
Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
GROWTH EQUITY FUNDS
All of the funds offered by this Prospectus seek capital growth by investing in
securities, primarily common stocks, that meet certain fundamental and technical
standards of selection (relating primarily to earnings and revenues
acceleration) and have, in the opinion of the funds' manager,
better-than-average potential for appreciation. So long as a sufficient number
of such securities are available, the manager intends to keep the funds fully
invested in these securities regardless of the movement of stock prices
generally. In most circumstances, the funds' actual level of cash and cash
equivalents will fluctuate between 0% and 10% of total assets with 90% to 100%
of its assets committed to equity and equity equivalent investments. The funds
may purchase securities only of companies that have a record of at least three
years of continuous operation.
SELECT AND HERITAGE
Securities of companies chosen for the Select and Heritage funds are chosen
primarily for their growth potential. Additionally, as a matter of fundamental
policy, 80% of the assets of Select and Heritage must be invested in securities
of companies that have a record of paying dividends, or have committed
themselves to the payment of regular dividends, or otherwise produce income. The
remaining 20% of fund assets may be invested in any otherwise permissible
securities that the manager believes will contribute to the funds' stated
investment objectives. The income payments of equity securities are only a
secondary consideration; therefore, the income return that Select and Heritage
provide may not be significant. Otherwise, Select and Heritage follow the same
investment techniques described below for Growth, Ultra and Vista.
Since Select is one of our larger funds and Heritage is substantially smaller,
Select will invest in shares of larger companies with larger share trading
volume, and Heritage will tend to invest in smaller companies with smaller share
trading volume. However, the two funds are not mutually exclusive, and a given
security may be owned by both funds. For the reasons stated in the next section,
it should be expected that Heritage will be more volatile and subject to greater
short-term risk and long-term opportunity than Select.
Because of its size, and because it invests primarily in securities that pay
dividends or are committed to the payment of dividends, Select may be expected
to be the least volatile of the funds described in this Prospectus.
GROWTH, ULTRA AND VISTA
Management selects for the portfolios of the Growth, Ultra and Vista funds,
securities of companies whose earnings and revenue trends meet management's
standards of selection.
Growth generally invests in large, established companies. Ultra generally
invests in medium to large size companies, while Vista invests in medium-sized
and smaller companies. As of February 1, 1997, the size of the companies (as
reflected by their capitalizations) held by the funds was as follows:
12 Information Regarding the Funds American Century Investments
Median Capitalization
of Companies Held
- ------------------------------------------------------------------
Growth $11,638,755,000
Ultra $10,795,469,000
Vista $ 1,069,608,000
- ------------------------------------------------------------------
The median capitalization of the companies in a given fund may change over time.
In addition, the criteria outlined above are not mutually exclusive, and a given
security may be owned by more than one of the funds.
The size of companies in which a fund invests tends to give each fund its own
characteristics of volatility and risk. These differences come about because
developments such as new or improved products or methods, which would be
relatively insignificant to a large company, may have a substantial impact on
the earnings and revenues of a small company and create a greater demand and a
higher value for its shares. However, a new product failure, which could readily
be absorbed by a large company, can cause a rapid decline in the value of the
shares of a smaller company. Hence, it could be expected that funds investing in
smaller companies would be more volatile than funds investing in larger
companies.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
Each of the funds may invest an unlimited amount of its assets in the securities
of foreign issuers, primarily from developed markets, when these securities meet
its standards of selection. The funds may make such investments either directly
in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign
securities. DRs are securities listed on exchanges or quoted in the
over-the-counter market in one country but represent the shares of issuers
domiciled in other countries. DRs may be sponsored or unsponsored. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
Subject to their individual investment objectives and policies, the funds may
invest in common stocks, convertible securities, preferred stocks, bonds, notes
and other debt securities of foreign issuers, and debt securities of foreign
governments and their agencies. The funds will limit their purchase of debt
securities to investment grade obligations.
Investments in foreign securities may present certain risks, including those
resulting from fluctuations in currency exchange rates, future political and
economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the funds may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars,
but have a value that is dependent on the performance of a foreign security, as
valued in the currency of its home country. As a result, the value of a fund's
portfolio may be affected by changes in the exchange rates between foreign
currencies and the U.S. dollar, as well as by changes in the market values of
the securities themselves. The performance of foreign currencies relative to the
U.S. dollar may be a factor in the overall performance of a fund.
To protect against adverse movements in exchange rates between currencies, the
funds may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates a fund to purchase or
sell a specific currency at a future date at a specific price.
A fund may elect to enter into a forward currency exchange contract with respect
to a specific purchase or sale of a security, or with respect to the fund's
portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, a
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
Prospectus Information Regarding the Funds 13
hedging." Each fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, a fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." A fund may not enter into a
portfolio hedging transaction where it would be obligated to deliver an amount
of foreign currency in excess of the aggregate value of its portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
Each fund will make use of portfolio hedging to the extent deemed appropriate by
the manager. However, it is anticipated that a fund will enter into portfolio
hedges much less frequently than transaction hedges.
If a fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of a fund's
assets will be committed to a segregated account in connection with portfolio
hedging transactions.
Predicting the relative future values of currencies is very difficult, and there
is no assurance that any attempt to protect a fund against adverse currency
movements through the use of forward currency exchange contracts will be
successful. In addition, the use of forward currency exchange contracts tends to
limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the financial information
on pages 5-11 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives. The
manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost that the funds pay directly.
Portfolio turnover may also affect the character of capital gains, if any,
realized and distributed by a fund since short-term capital gains are taxable as
ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase obligation,
a repurchase agreement can be considered a loan collateralized by the security
purchased. The fund's risk is the ability of the seller to pay the agreed-upon
repurchase price on the repurchase date. If the seller defaults, the fund may
incur costs in disposing of the collateral, which would reduce the amount
realized thereon. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the value
of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued by
the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities
14 Information Regarding the Funds American Century Investments
dealers who are deemed creditworthy pursuant to criteria adopted by the funds'
Board of Directors.
No fund will invest more than 15% of its assets in repurchase agreements
maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of the
funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed securities
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices, or currency exchange rates and for cash management purposes as a
low-cost method of gaining exposure to a particular securities market without
investing directly in those securities.
No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment since the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the Board will
review the manager's policy for investments in derivative securities annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market. Interest on
loaned securities may not exceed 10% of the annual gross income of the fund
(without offset for realized capital gains). The portfolio lending policy
described in this
Prospectus Information Regarding the Funds 15
paragraph is a fundamental policy that may be changed only by a vote of a
majority of fund shareholders.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time the commitment to purchase is
made. Delivery of and payment for these securities typically occur 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
when-issued security. Accordingly, the value of such security may decline prior
to delivery, which could result in a loss to the fund. A separate account for
each fund consisting of cash or high-quality liquid debt securities in an amount
at least equal to the when-issued commitments will be established and maintained
with the custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission has taken the position that the liquidity of
such securities in the portfolio of a fund offering redeemable securities is a
question of fact for the board of directors to determine, such determination to
be based upon a consideration of the readily available trading markets and the
review of any contractual restrictions. The staff also acknowledges that, while
the board retains ultimate responsibility, it may delegate this function to the
manager. Accordingly, the board has established guidelines and procedures for
determining the liquidity of Rule 144A securities and has delegated the
day-to-day function of determining the liquidity of Rule 144A securities to the
manager. The board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain qualified
institutional investors, the liquidity of such securities may be limited
accordingly and a fund may, from time to time, hold a Rule 144A security that is
illiquid. In such an event, the funds' manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
SHORT SALES
Each fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow a fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns at a
current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code and
Regulations.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund performance
may be shown by presenting one or more performance measurements, including
cumulative total return or average annual total return, and yield. Performance
data may be quoted separately for the Advisor Class and for the other classes
offered by the funds.
Cumulative total return data is computed by considering all elements of return,
including reinvestment of dividends and capital gains distributions, over a
stated period of time. Average annual total return is determined by computing
the annual compound return over a stated period of time that
16 Information Regarding the Funds American Century Investments
would have produced the fund's cumulative total return over the same period if
the fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period expressed as
a percentage of the fund's share price.
Yields are calculated according to accounting methods that are standardized in
accordance with SEC rules for all stock and bond funds. Because yield accounting
methods differ from the methods used for other accounting purposes, a fund's
yield may not equal the income paid on its shares or the income reported in the
fund's financial statements.
The funds may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
All performance information advertised by the funds is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Funds 17
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the funds offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN CENTURY FUNDS
One or more of the funds offered by this Prospectus is available as an
investment option under your employer-sponsored retirement or savings plan or
through or in connection with a program, product or service offered by a
financial intermediary, such as a bank, broker-dealer or insurance company.
Since all records of your share ownership are maintained by your plan sponsor,
plan recordkeeper, or other financial intermediary, all orders to purchase,
exchange and redeem shares must be made through your employer or other financial
intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the administrator of
your plan or your employee benefits office can provide you with information on
how to participate in your plan and how to select American Century funds as an
investment option.
If you are purchasing through a financial intermediary, you should contact your
service representative at the financial intermediary for information about how
to select American Century funds.
If you have questions about a fund, see "Investment Policies of the Funds," page
12, or call one of our Institutional Service Representatives at 1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See "When
Share Price is Determined," page 20.
We may discontinue offering shares generally in the funds (including any class
of shares of a fund) or in any particular state without notice to shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the shares of
a fund for shares of another fund in our family. See your plan administrator,
employee benefits office or financial intermediary for details on the rules in
your plan governing exchanges.
Exchanges are made at the respective net asset values, next computed after
receipt of the exchange instruction by us. If in any 90-day period, the total of
the exchanges and redemptions from the account of any one plan participant or
financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's
assets, further exchanges may be subject to special requirements to comply with
our policy on large equity fund redemptions. See "Special Requirements for Large
Redemptions," this page.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan or
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price Is Determined," page 20. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule 18f-1 under the Investment Company Act,
which obligates each fund to redeem shares in cash, with respect to any one
participant account during any 90-day period, up to the lesser of $250,000 or 1%
of the assets of the fund. Although redemptions in excess of this limitation
will also normally be paid in cash, we reserve the right to honor these
redemptions by making payment in whole or in part in readily marketable
securities (a "redemption-in-kind"). If payment is made in securities, the
securities will be selected by the fund, will be valued in the same manner as
they are in computing the fund's net asset value and will
18 How to Invest with American Century Investments American Century Investments
be provided to the redeeming plan participant or financial intermediary in lieu
of cash without prior notice.
If you expect to make a large redemption and would like to avoid any possibility
of being paid in securities, you may do so by providing us with an unconditional
instruction to redeem at least 15 days prior to the date on which the redemption
transaction is to occur. The instruction must specify the dollar amount or
number of shares to be redeemed and the date of the transaction. Receipt of your
instruction 15 days prior to the transaction provides the fund with sufficient
time to raise the cash in an orderly manner to pay the redemption and thereby
minimizes the effect of the redemption on the fund and its remaining
shareholders.
Despite the funds' right to redeem fund shares through a redemption-in-kind, we
do not expect to exercise this option unless a fund has an unusually low level
of cash to meet redemptions and/or is experiencing unusually strong demands for
its cash. Such a demand might be caused, for example, by extreme market
conditions that result in an abnormally high level of redemption requests
concentrated in a short period of time. Absent these or similar circumstances,
we expect redemptions in excess of $250,000 to be paid in cash in any fund with
assets of more than $50 million if total redemptions from any one account in any
90-day period do not exceed one-half of 1% of the total assets of the fund.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get answers
to any questions that you may have about the funds and the services we offer,
call one of our Institutional Service Representatives at 1-800-345-3533.
Prospectus How to Invest with American Century Investments 19
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net asset
value is determined by calculating the total value of a fund's assets, deducting
total liabilities and dividing the result by the number of shares outstanding.
For all American Century funds, except funds issued by the American Century
Target Maturities Trust, net asset value is determined at the close of regular
trading on each day that the New York Stock Exchange is open, usually 3 p.m.
Central time. The net asset values for the Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents before the time as of which the net
asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.
Investments are considered received only when payment is received by us. Wired
funds are considered received on the day they are deposited in our bank account
if they are deposited before the time as of which the net asset value is
determined.
It is the responsibility of your plan recordkeeper or financial intermediary to
transmit your purchase, exchange and redemption requests to the funds' transfer
agent prior to the applicable cut-off time for receiving orders and to make
payment for any purchase transactions in accordance with the funds' procedures
or any contractual arrangements with the funds or the funds' distributor in
order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
20 Additional Information You Should Know American Century Investments
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock Exchange
is not open and on which a fund's net asset value is not calculated. Therefore,
such calculation does not take place contemporaneously with the determination of
the prices of many of the portfolio securities used in such calculation and the
value of a fund's portfolio may be affected on days when shares of the fund may
not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds are published in leading
newspapers daily. Because the total expense ratio for the Advisor Class shares
is 0.25% higher than the Investor Class, their net asset values will be lower
than the Investor Class. The net asset value of the Advisor Class of each fund
may be obtained by calling us.
DISTRIBUTIONS
In general, distributions from net investment income and net realized securities
gains if any, are declared and paid once a year, but the funds may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act. Distributions from investment
income and from net profits realized on the sale of securities, if any, will be
declared annually on or before December 31.
THE OBJECTIVE OF THESE FUNDS IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF
DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF
YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE.
Participants in employer-sponsored retirement or savings plan must reinvest all
distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
A distribution on shares of a fund does not increase the value of your shares or
your total return. At any given time the value of your shares includes the
undistributed net gains, if any, realized by the fund on the sale of portfolio
securities, and undistributed dividends and interest received, less fund
expenses.
Because such gains and dividends are included in the value of your shares, when
they are distributed the value of your shares is reduced by the amount of the
distribution. If you buy your shares through a taxable account just before the
distribution, you will pay the full price for your shares, and then receive a
portion of the purchase price back as a taxable distribution. See "Taxes," this
page.
TAXES
The funds have elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a qualified
employer-sponsored retirement or savings plan, income and capital gains
distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term
Prospectus Additional Information You Should Know 21
capital gains are taxable as long-term capital gains regardless of the length of
time you have held the shares on which such distributions are paid. However, you
should note that any loss realized upon the sale or redemption of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any distribution of long-term capital gain to you with respect to such
shares.
Dividends and interest received by a fund on foreign securities may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Foreign countries generally do not impose taxes on capital gains in
respect of investments by non-resident investors. The foreign taxes paid by a
fund will reduce its dividends.
If more than 50% of the value of a fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by you.
If a fund purchases the securities of certain foreign investment funds or trusts
called passive foreign investment companies, capital gains on the sale of such
holdings will be deemed to be ordinary income regardless of how long the fund
holds its investment. The fund may also be subject to corporate income tax and
an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV from either us or your
financial intermediary notifying you of the status of your distributions for
federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, either we or your financial intermediary is required by federal
law to withhold and remit to the IRS 31% of reportable payments (which may
include dividends, capital gains distributions and redemptions). Those
regulations require you to certify that the Social Security number or tax
identification number you provide is correct and that you are not subject to 31%
withholding for previous under-reporting to the IRS. You will be asked to make
the appropriate certification on your application. Payments reported by us that
omit your Social Security number or tax identification number will subject us to
a penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed, and is not
refundable.
Redemption of shares of a fund (including redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders
22 Additional Information You Should Know American Century Investments
have held such shares for a period of more than one year. If a loss is realized
on the redemption of fund shares, the reinvestment in additional fund shares
within 30 days before or after the redemption may be subject to the "wash sale"
rules of the Code, resulting in a postponement of the recognition of such loss
for federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the funds. Acting pursuant to an
investment management agreement entered into with the funds, American Century
Investment Management, Inc. serves as the investment manager of the funds. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The manager has been providing investment advisory
services to investment companies and institutional clients since it was founded
in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolios of each fund and
directs the purchase and sale of its investment securities. It utilizes teams of
portfolio managers, assistant portfolio managers and analysts acting together to
manage the assets of the funds. The teams meet regularly to review portfolio
holdings and to discuss purchase and sale activity. The teams adjust holdings in
the funds' portfolios as they deem appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the funds as necessary between team meetings.
The portfolio manager members of the teams managing the funds described in this
prospectus and their work experience for the last five years are as follows:
JAMES E. STOWERS III, President and Portfolio Manager, joined American Century
in 1981. He is a member of the teams that manage Growth and Ultra.
CHARLES M. DUBOC, Senior Vice President and Portfolio Manager, joined Twentieth
Century in August 1985, and served as Fixed Income Portfolio Manager from that
time until April 1993. In April 1993, Mr. Duboc joined American Century's equity
investment efforts. He is a member of the team that manages Select.
GLENN A. FOGLE, Vice President and Portfolio Manager, joined American Century in
September 1990 as an Investment Analyst, a position he held until March 1993. At
that time he was promoted to Portfolio Manager. He is a member of the team that
manages Vista.
NANCY B. PRIAL, Vice President and Portfolio Manager, joined American Century in
February 1994 as a Portfolio Manager. For more than four years prior to joining
American Century, Ms. Prial served as Senior Vice President and Portfolio
Manager at Frontier Capital Management Company, Boston, Massachusetts. She is a
member of the team that manages Heritage.
KEVIN M. LEWIS, Portfolio Manager, joined American Century in October 1995.
Prior to that he served as a Portfolio Manager for Virtus Capital Management,
Richmond, Virginia, from January 1995 to October 1995. Prior to that, he was a
Portfolio Manager for Signet Trust Company, Richmond, Virginia. Mr. Lewis is a
member of the team that manages Heritage.
JOHN D. SEITZER, Portfolio Manager, joined American Century in June 1993 as an
Investment Analyst, a position he held until July 1996. At that time he was
promoted to Portfolio Manager. Prior to joining American Century, Mr. Seitzer
attended Indiana University from August 1991 to June 1993, where he obtained his
MBA degree. Mr. Seitzer is a member of the team that manages Vista.
BRUCE A. WIMBERLY, Portfolio Manager, joined American Century in September 1994
as an Investment Analyst, a position he held until July 1996. At that time he
was promoted to Portfolio Manager. Prior to joining American Century, Mr.
Wimberly attended Kellogg Graduate School of Management, Northwestern University
from August 1992 to August
Prospectus Additional Information You Should Know 23
1994, where he obtained his MBA degree. Prior to that he served as a Research
Analyst for Frontier Capital Management Company, Boston, Massachusetts. Mr.
Wimberly is a member of the team that manages Ultra.
JEAN LEDFORD, Vice President and Portfolio Manager, joined American Century in
January 1997 as a Portfolio Manager. Prior to joining American Century, Ms.
Ledford worked for the State of Wisconsin Investment Board as an Investment
Director from 1994 to 1996 and as an Assistant Investment Director from 1983 to
1994. Ms. Ledford is a member of the team that manages Select.
The activities of the manager are subject only to directions of the funds' Board
of Directors. The manager pays all the expenses of the funds except brokerage,
taxes, interest, fees and expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the Advisor Class of the funds, the manager
receives an annual fee of 0.75% of the average net assets of each of the funds.
On the first business day of each month, each series of shares pays a management
fee to the manager for the previous month at the rate specified. The fee for the
previous month is calculated by multiplying the applicable fee for such series
by the aggregate average daily closing value of the series' net assets during
the previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend-paying agent for the funds. It
provides facilities, equipment and personnel to the funds, and is paid for such
services by the manager.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services, Inc.,
a registered broker-dealer and an affiliate of the manager. As agent for the
funds and the manager, the distributor enters into contracts with various banks,
broker-dealers, insurance companies and other financial intermediaries with
respect to the sale of the funds' shares and/or the use of the funds' shares in
various financial services. The manager (or an affiliate) pays all expenses
incurred in promoting sales of, and distributing, the Advisor Class and in
securing such services out of the Rule 12b-1 fees described in the section that
follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under the
Investment Company Act permits investment companies that adopt a written plan to
pay certain expenses associated with the distribution of their shares. Pursuant
to that rule, the
24 Additional Information You Should Know American Century Investments
funds' Board of Directors and the initial shareholder of the funds' Advisor
Class shares have approved and entered into a Master Distribution and
Shareholder Services Plan (the "Plan") with the Distributor. Pursuant to the
Plan, each fund pays the manager a shareholder services fee and a distribution
fee, each equal to 0.25% (for a total of 0.50%) per annum of the average daily
net assets of the shares of the fund's Advisor Class. The shareholder services
fee is paid for the purpose of paying the costs of securing certain shareholder
and administrative services, and the distribution fee is paid for the purpose of
paying the costs of providing various distribution services. All or a portion of
such fees are paid by the manager to the banks, broker-dealers, insurance
companies or other financial intermediaries through which such shares are made
available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and therefore may constitute "service fees" for purposes of applicable
rules of the National Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was organized as a
Maryland corporation on July 2, 1990. The corporation commenced operations on
February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a
Delaware corporation which had been in business since October 1958. Pursuant to
the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland
corporation was the surviving entity and continued the business of the Delaware
corporation with the same officers and directors, the same shareholders and the
same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main Street,
P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by
mail to that address, or by phone to 1-800-345-3533 (international calls:
816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value shares.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
American Century offers four classes of each of the funds offered by this
Prospectus: an Investor Class, an Institutional Class, a Service Class, and the
Advisor Class. The shares offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The
Institutional Class and Service Class are primarily offered to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Advisor Class.
The difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the Investor Class of shares, call one of our
Investor Services Representatives at 1-800-345-2021. For information concerning
the Institutional or Service Classes of shares, call one of our Institutional
Service Representatives at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of another class of the
same fund.
Prospectus Additional Information You Should Know 25
Each share, irrespective of series or class, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except for
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for the
funds to hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request a fund to hold a special
meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
26 Additional Information You Should Know American Century Investments
NOTES
Notes 27
NOTES
28 Notes
NOTES
Notes 29
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9702 [recycled logo]
SH-BKT-7805 Recycled
<PAGE>
PROSPECTUS
[american century company logo]
American
Century (sm)
MARCH 1, 1997
AMERICAN
CENTURY
GROUP
BALANCED
ADVISOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
Benham Group(R) American Century Group Twentieth Century(R) Group
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Balanced
PROSPECTUS
MARCH 1, 1997
BALANCED
ADVISOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load and low-load
mutual funds covering a variety of investment opportunities. One of the funds
that seeks capital growth and current income is described in this Prospectus.
Its investment objective is listed on page 2 of this Prospectus. The other funds
are described in separate prospectuses.
The fund shares offered in this Prospectus (the Advisor Class shares) are
sold at its net asset value with no sales charges or commissions. The Advisor
Class shares are subject to Rule 12b-1 shareholder services and distribution
fees as described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY BALANCED FUND
The Balanced fund seeks capital growth and current income. It is
management's intention to maintain approximately 60% of the fund's assets in
common stocks that are considered by management to have better-than-average
prospects for appreciation and the remainder in bonds and other fixed income
securities.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund....................2
Transaction and Operating Expense Table.............4
Performance Information of Other Class..............5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund.....................6
Investment Approach............................6
Equity Investments.............................6
Fixed Income Investments.......................6
Other Investment Practices, Their Characteristics
and Risks........................................7
Foreign Securities.............................7
Forward Currency Exchange Contracts............7
Portfolio Turnover.............................8
Repurchase Agreements..........................8
Derivative Securities..........................9
Portfolio Lending..............................9
When-Issued Securities.........................9
Rule 144A Securities..........................10
Short Sales...................................10
Performance Advertising............................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American
Century Funds...................................12
How to Exchange from One American Century
Fund to Another.................................12
How to Redeem Shares...............................12
Special Requirements for Large Redemptions....12
Telephone Services.................................13
Investors Line................................13
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price........................................14
When Share Price Is Determined................14
How Share Price Is Determined.................14
Where to Find Information About Share Price...15
Distributions......................................15
Taxes..............................................15
Tax-Deferred Accounts.........................15
Taxable Accounts..............................15
Management.........................................17
Investment Management.........................17
Code of Ethics................................17
Transfer and Administrative Services..........18
Distribution of Fund Shares........................18
Service and Distribution Fees.................18
Further Information About American Century.........18
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Balanced
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases....................... none
Maximum Sales Load Imposed on Reinvested Dividends............ none
Deferred Sales Load........................................... none
Redemption Fee................................................ none
Exchange Fee.................................................. none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees............................................... 0.75%
12b-1 Fees(1)................................................. 0.50%
Other Expenses(2)............................................. 0.00%
Total Fund Operating Expenses................................. 1.25%
EXAMPLE:
You would pay the following expenses on a 1 year $ 13
$1,000 investment, assuming a 5% annual return and 3 years 40
redemption at the end of each time period: 5 years 68
10 years 150
(1) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the manager, and a portion is used to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page 18.
(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of Balanced offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by Securities
and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this prospectus are Advisor Class shares. The fund
offers three other classes of shares, one of which is primarily made available
to retail investors and two that are primarily made available to institutional
investors. The other classes have different fee structures than the Advisor
Class. The difference in the fee structures among the classes is the result of
their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. Accordingly, the core investment advisory expenses
do not vary by class. A difference in fees will result in different performance
for those classes. For additional information about the various classes, see
"Further Information About American Century," page 18.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
BALANCED
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the fund for the time periods presented, the fund's
performance information would be lower as a result of the additional expense.
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.....$17.70 $15.94 $16.52 $14.89 $15.11 $10.89 $11.84 $10.13 $10.22
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income..................44(2) .48(2) .42 .38 .33 .38 .41 .37 .01
Net Realized and Unrealized Gain (Loss)
on Investment Transactions......... 1.88 2.03 (.58) 1.62 (.23) 4.22 (.62) 1.71 (.10)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations...... 2.32 2.51 (.16) 2.00 .10 4.60 (.21) 2.08 (.09)
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income............ (.46) (.475) (.416) (.375) (.322) (.384) (.417) (.372) --
From Net Realized Gains
on Investment Transactions.........(1.01) (.274) -- -- -- -- (.320) -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions...................(1.47) (.749) (.416) (.375) (.322) (.384) (.737) (.372) --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period...........$18.55 $17.70 $15.94 $16.52 $14.89 $15.11 $10.89 $11.84 $10.13
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3).......................14.04% 16.36% (.93)% 13.64% .63% 42.92% (2.10)% 20.94% (.88)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets................. .99% .98% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net Investment
Income to Average Net Assets....... 2.5% 2.9% 2.7% 2.4% 2.4% 3.1% 3.8% 4.2% 4.4%(4)
Portfolio Turnover Rate............... 130% 85% 94% 95% 100% 116% 104% 171% 99%(4)
Average Commission Paid per
Investment Security Traded......... $.040 $.039 --(5) --(5) --(5) --(5) --(5) --(5) --(5)
Net Assets, End of Period
(in millions) .................... $879 $816 $704 $706 $654 $255 $66 $30 $3
(1) October 20, 1988 (inception) through October 31, 1988.
(2) Computed using average shares outstanding throughout the period.
(3) Total returns for periods less than one year are not annualized. Total
return assumes reinvestment of dividends and capital gains distributions,
if any.
(4) Annualized.
(5) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
INVESTMENT APPROACH
The manager intends to invest approximately 60% of the fund's assets in
equity securities, while the remainder will be invested in bonds and other fixed
income securities. A description of the investment style for each class of
investment follows.
EQUITY INVESTMENTS
With the equity portion of the Balanced portfolio, the manager seeks
capital growth by investing in securities, primarily common stocks, that meet
certain fundamental and technical standards of selection (relating primarily to
earnings and revenues acceleration) and have, in the opinion of the manager,
better-than-average potential for appreciation. So long as a sufficient number
of such securities are available, the manager intends to keep the equity portion
of Balanced fully invested in these securities regardless of the movement of
stock prices generally. The fund may purchase securities only of companies that
have a record of at least three years continuous operation.
The manager selects, for the equity portion of the portfolio, securities of
companies whose earnings and revenue trends meet management's standards of
selection. The size of the companies in which a fund invests tends to give it
its own characteristics of volatility and risk. These differences come about
because developments such as new or improved products or methods, which would be
relatively insignificant to a large company, may have a substantial impact on
the earnings and revenues of a small company and create a greater demand and a
higher value for its shares. However, a new product failure which could readily
be absorbed by a large company can cause a rapid decline in the value of the
shares of a smaller company. Hence, it could be expected that the volatility of
the fund will be impacted by the size of companies in which it invests.
FIXED INCOME INVESTMENTS
The manager intends to maintain approximately 40% of the fund's assets in
fixed income securities with a minimum of 25% of that amount in fixed income
senior securities. The fixed income securities in the fund will be chosen based
on their level of income production and price stability. The fund may invest in
a diversified portfolio of debt and other fixed-rate securities payable in
United States currency. These may include obligations of the United States
government, its agencies and instrumentalities; corporate securities (bonds,
notes, preferreds and convertible issues), and sovereign government, municipal,
mortgage-backed and other asset-backed securities.
There are no maturity restrictions on the fixed income securities in which
the fund invests. Under normal market conditions the weighted average portfolio
maturity for the fixed income portfolio will be in the three- to 10-year range.
The manager will actively manage the portfolio, adjusting the weighted average
portfolio maturity in response to expected changes in interest rates. During
periods of rising interest rates, a shorter weighted average maturity may be
adopted in order to reduce the effect of bond price declines on the fund's net
asset value. When interest rates are falling and bond prices rising, a longer
weighted average portfolio maturity may be adopted.
It is the manager's intention to invest the fund's fixed income holdings in
high-grade securities. At least 80% of fixed income assets will be invested in
6 Information Regarding the Fund American Century Investments
securities which at the time of purchase are rated within the three highest
categories by a nationally recognized statistical rating organization [at least
A by Moody's Investors Service, Inc. (Moody's) or Standard & Poor's Corp.
(S&P)].
The remaining portion of the fixed income assets may be invested in issues
in the fourth highest category (Baa by Moody's or BBB by S&P), or, if not rated,
are of equivalent investment quality as determined by the manager and which, in
the opinion of the manager, can contribute meaningfully to the fund's results
without compromising its objectives. Such issues might include a lower-rated
issue where research suggests the likelihood of a rating increase; or a
convertible issue of a company deemed attractive by the equity management team.
According to Moody's, bonds rated Baa are medium-grade and possess some
speculative characteristics. A BBB rating by S&P indicates S&P's belief that a
security exhibits a satisfactory degree of safety and capacity for repayment,
but is more vulnerable to adverse economic conditions or changing circumstances.
See "An Explanation of Fixed Income Securities Ratings" in the Statement of
Additional Information.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities of
foreign issuers, primarily from developed markets, when these securities meet
its standards of selection. The fund may make such investments either directly
in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign
securities. DRs are securities listed on exchanges or quoted in the
over-the-counter market in one country but represent the shares of issuers
domiciled in other countries. DRs may be sponsored or unsponsored. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
The fund may invest in common stocks, convertible securities, preferred
stocks, bonds, notes and other debt securities of foreign issuers, and debt
securities of foreign governments and their agencies. The fund will limit its
purchase of debt securities to investment-grade obligations.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the fund may be denominated in
foreign currencies. Other securities, such as DRs, may be denominated in U.S.
dollars, but have a value that is dependent on the performance of a foreign
security, as valued in the currency of its home country. As a result, the value
of the fund's portfolio may be affected by changes in the exchange rates between
foreign currencies and the U.S. dollar, as well as by changes in the market
values of the securities themselves. The performance of foreign currencies
relative to the U.S. dollar may be a factor in the overall performance of the
fund.
To protect against adverse movements in exchange rates between currencies,
the fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
Prospectus Information Regarding the Fund 7
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where it would be obligated to deliver an amount
of foreign currency in excess of the aggregate value of its portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the fund will enter
into portfolio hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund,
when required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of the
fund's assets will be committed to a segregated account in connection with
portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the fund against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The portfolio turnover rate of the fund is shown in the financial
information on page 5 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of the fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by the fund since short-term capital
gains are taxable as ordinary income.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions present
an attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The fund will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the fund's Board of Directors.
The fund will invest no more than 15% of its assets in repurchase
agreements maturing in more than seven days.
8 Information Regarding the Fund American Century Investments
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund
may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
The fund may not invest in a derivative security unless the reference index
or the instrument to which it relates is an eligible investment for the fund.
For example, a security whose underlying value is linked to the price of oil
would not be a permissible investment since the funds may not invest in oil and
gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market. Interest on
loaned securities may not exceed 10% of the annual gross income of the fund
(without offset for realized capital gains). The portfolio lending policy
described in this paragraph is a fundamental policy that may be changed only by
a vote of a majority of the fund's shareholders.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued
basis without limit when, in the opinion of the manager, such purchases will
further the investment objectives of the fund. The price of when-issued
securities is established at the
Prospectus Information Regarding the Fund 9
time the commitment to purchase is made. Delivery of and payment for these
securities typically occur 15 to 45 days after the commitment to purchase.
Market rates of interest on debt securities at the time of delivery may be
higher or lower than those contracted for on the when-issued security.
Accordingly, the value of such security may decline prior to delivery, which
could result in a loss to the fund. A separate account for the fund consisting
of cash or high-quality liquid debt securities in an amount at least equal to
the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the Board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the Board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The Board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and the fund may, from time to time, hold a Rule 144A
security that is illiquid. In such an event, the fund's manager will consider
appropriate remedies to minimize the effect on the fund's liquidity. The fund
may not invest more than 15% of its assets in illiquid securities (securities
that may not be sold within seven days at approximately the price used in
determining the net asset value of fund shares).
SHORT SALES
The fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns
at a current attractive price, but also wishes to defer recognition of gain or
loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code.
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return, average annual total return, and yield.
Performance data may be quoted separately for the Advisor Class and the other
classes offered by the fund.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price.
Yield is calculated by adding over a 30-day (or one-month) period all
interest and dividend income (net of fund expenses) calculated on each day's
market values, dividing this sum by the average number of fund shares
outstanding during the period, and expressing the result as a percentage of the
fund's share price on
10 Information Regarding the Fund American Century Investments
the last day of the 30-day (or one-month) period. The percentage is then
annualized. Capital gains and losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes,
the fund's yield may not equal the income paid on your shares or the income
reported in the fund's financial statements.
The fund may also include in advertisements data comparing performance with
the performance of non-related investment media, published editorial comments
and performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Fund 11
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the fund offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN
CENTURY FUNDS
The Balanced Fund is available as an investment option under your
employer-sponsored retirement or savings plan or through or in connection with a
program, product or service offered by a financial intermediary, such as a bank,
broker-dealer or insurance company. Since all records of your share ownership
are maintained by your plan sponsor, plan recordkeeper, or other financial
intermediary, all orders to purchase, exchange and redeem shares must be made
through your employer or other financial intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select American
Century funds as an investment option.
If you are purchasing through a financial intermediary, you should contact
your service representative at the financial intermediary for information about
how to select American Century funds.
If you have questions about the fund, see "Investment Policies of the
Fund," page 6, or call one of our Institutional Service Representatives at
1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See
"When Share Price is Determined," page 14.
We may discontinue offering shares generally in the fund (including any
class of shares of the fund) or in any particular state without notice to
shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY
FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the
shares of the fund for shares of another fund in our family. See your plan
administrator, employee benefits office or financial intermediary for details on
the rules in your plan governing exchanges.
Exchanges are made at the respective net asset values, next computed after
receipt of the exchange instruction by us. If in any 90-day period, the total of
the exchanges and redemptions from the account of any one plan participant or
financial intermediary client exceeds the lesser of $250,000 or 1% of a fund's
assets, further exchanges may be subject to special requirements to comply with
our policy on large equity fund redemptions. See "Special Requirements for Large
Redemptions," this page.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan or
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price Is Determined," page 14. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule18f-1 under the Investment Company
Act, which obligates the fund to redeem shares in cash, with respect to any one
participant account during any 90-day period, up to the lesser of $250,000 or 1%
of the assets of the fund. Although redemptions in excess of this limitation
will also normally be paid in cash, we reserve the
12 How to Invest with American Century Investments American Century Investments
right to honor these redemptions by making payment in whole or in part in
readily marketable securities (a "redemption-in-kind"). If payment is made in
securities, the securities will be selected by the fund, will be valued in the
same manner as they are in computing the fund's net asset value and will be
provided to the redeeming plan participant or financial intermediary in lieu of
cash without prior notice.
If you expect to make a large redemption and would like to avoid any
possibility of being paid in securities, you may do so by providing us with an
unconditional instruction to redeem at least 15 days prior to the date on which
the redemption transaction is to occur. The instruction must specify the dollar
amount or number of shares to be redeemed and the date of the transaction.
Receipt of your instruction 15 days prior to the transaction provides the fund
with sufficient time to raise the cash in an orderly manner to pay the
redemption and thereby minimizes the effect of the redemption on the fund and
its remaining shareholders.
Despite its right to redeem fund shares through a redemption-in-kind, we do
not expect to exercise this option unless the fund has an unusually low level of
cash to meet redemptions and/or is experiencing unusually strong demands for its
cash. Such a demand might be caused, for example, by extreme market conditions
that result in an abnormally high level of redemption requests concentrated in a
short period of time. Absent these or similar circumstances, we expect
redemptions in excess of $250,000 to be paid in cash in any fund with assets of
more than $50 million if total redemptions from any one account in any 90-day
period do not exceed one-half of 1% of the total assets of the fund.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get
answers to any questions that you may have about the funds and the services we
offer, call one of our Institutional Service Representatives at 1-800-345-3533.
Prospectus How to Invest with American Century Investments 13
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for the Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or our agents before the time as of which the
net asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined as of, the next
day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before time as of which the net asset value of the
fund is determined.
It is the responsibility of your plan recordkeeper or financial
intermediary to transmit your purchase, exchange and redemption requests to the
fund's transfer agent prior to the applicable cut-off time for receiving orders
and to make payment for any purchase transactions in accordance with the fund's
procedures or any contractual arrangements with the fund or the fund's
distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
14 Additional Information You Should Know American Century Investments
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which the fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of the fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset value of the Investor Class of the fund is published in
leading newspapers daily. Because the total expense ratio for the Advisor Class
shares is 0.25% higher than the Investor Class, their net asset values will be
lower than the Investor Class. The net asset value of the Advisor Class may be
obtained by calling us.
DISTRIBUTIONS
Distributions from net investment income are declared and paid quarterly.
Distributions from net realized securities gains, if any, are declared and paid
once a year, but the fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code, in all
events in a manner consistent with the provisions of the Investment Company Act.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distribution made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
A distribution on shares of the fund does not increase the value of your
shares or your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
fund expenses.
Because such gains and dividends are included in the value of your shares,
when they are distributed, the value of your shares is reduced by the amount of
the distribution. If you buy your shares through a taxable account just before
the distribution, you will pay the full price for your shares, and then receive
a portion of the purchase price back as a taxable distribution. See "Taxes,"
this page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless of the length of time you have held the
shares on which such distributions are paid. However, you should note that any
loss realized upon the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of any distribution of
long-term capital gain to you with respect to such shares.
Prospectus Additional Information You Should Know 15
Dividends and interest received by the fund on foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Foreign countries generally do not impose taxes on capital
gains in respect of investments by non-resident investors. The foreign taxes
paid by the fund will reduce its dividends.
If more than 50% of the value of the fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by you.
If the fund purchases the securities of certain foreign investment funds or
trusts called passive foreign investment companies, capital gains on the sale of
such holdings will be deemed to be ordinary income regardless of how long the
fund holds its investment. The fund may also be subject to corporate income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV from either us or your
financial intermediary notifying you of the status of your distributions for
federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code, either we or your financial intermediary is required by federal law to
withhold and remit to the IRS 31% of reportable payments (which may include
dividends, capital gains distributions and redemptions). Those regulations
require you to certify that the Social Security number or tax identification
number you provide is correct and that you are not subject to 31% withholding
for previous under-reporting to the IRS. You will be asked to make the
appropriate certification on your application. Payments reported by us that omit
your Social Security number or tax identification number will subject us to a
penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed, and is not
refundable.
Redemption of shares of the fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
16 Additional Information You Should Know American Century Investments
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the fund. Acting pursuant
to an investment advisory agreement entered into with the fund, American Century
Investment Management, Inc. serves as the investment manager of the fund. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The manager has been providing investment advisory
services to investment companies and institutional clients since it was founded
in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the portfolio as it deems appropriate in pursuit of the fund's investment
objectives. Individual portfolio manager members of the team may also adjust
portfolio holdings of the fund as necessary between team meetings.
The portfolio manager members of the team managing Balanced and their work
experience for the last five years are as follows:
JAMES E. STOWERS III, President and Portfolio Manager, joined American
Century in 1981. He is a member of the team that manages the equity portion of
Balanced.
BRUCE A. WIMBERLY, Portfolio Manager, joined American Century in September
1994 as an Investment Analyst, a position he held until July 1996. At that time
he was promoted to Portfolio Manager. Prior to joining American Century, Mr.
Wimberly attended Kellogg Graduate School of Management, Northwestern University
from August 1992 to August 1994, where he obtained his MBA degree. Prior to that
he served as a Research Analyst for Frontier Capital Management Company, Boston,
Massachusetts. Mr. Wimberly is a member of the team that manages the equity
portion of Balanced.
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager,
joined American Century as Vice President and Portfolio Manager in November
1989. In April 1993, he became Senior Vice President. He is a member of the team
that manages the fixed income portion of Balanced.
JEFFREY L. HOUSTON, Portfolio Manager, has worked for American Century
since November 1990. He is a member of the team that manages the fixed income
portion of Balanced.
The activities of the manager are subject only to directions of the fund's
Board of Directors. The manager pays all the expenses of the fund except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the Advisor Class of the fund, the manager
receives an annual fee of 0.75% of the average net assets of the fund.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the rate specified. The fee for the
previous month is calculated by multiplying the applicable fee for such series
by the aggregate average daily closing value of the series' net assets during
the previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolio
obtain preclearance before executing personal trades.
Prospectus Additional Information You Should Know 17
With respect to Portfolio Managers and other investment personnel, the Code of
Ethics prohibits acquisition of securities in an initial public offering, as
well as profits derived from the purchase and sale of the same security within
60 calendar days. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage those
funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the fund.
It provides facilities, equipment and personnel to the fund, and is paid for
such services by the manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., Chairman of the fund's Board of
Directors, controls American Century Companies by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the manager. As agent for
the fund and the manager, the distributor enters into contracts with various
banks, broker-dealers, insurance companies and other financial intermediaries
with respect to the sale of the fund's shares and/or the use of the fund's
shares in various financial services. The manager (or an affiliate) pays all
expenses incurred in promoting sales of, and distributing, the Advisor Class and
in securing such services out of the Rule 12b-1 fees described in the section
that follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under
the Investment Company Act permits investment companies that adopt a written
plan to pay certain expenses associated with the distribution of their shares.
Pursuant to that rule, the fund's Board of Directors and the initial shareholder
of the fund's Advisor Class shares have approved and adopted a Master
Distribution and Shareholder Services Plan (the "Plan"). Pursuant to the Plan,
the fund pays the manager a shareholder services fee and a distribution fee,
each equal to 0.25% (for a total of 0.50%) per annum of the average daily net
assets of the shares of the fund's Advisor Class. The shareholder services fee
is paid for the purpose of paying the costs of securing certain shareholder and
administrative services, and the distribution fee is paid for the purpose of
paying the costs of providing various distribution services. All or a portion of
such fees are paid by the manager to the banks, broker-dealers, insurance
companies or other financial intermediaries through which such shares are made
available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and therefore may constitute "service fees" for purposes of applicable
rules of the National Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the fund, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the fund is American Century Tower, 4500 Main
Street, P.O. Box 419385,
18 Additional Information You Should Know American Century Investments
Kansas City, Missouri 64141-6385. All inquiries may be made by mail to that
address, or by telephone to 1-800-345-3533 (international calls: 816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value
shares. Each series is commonly referred to as a fund. The assets belonging to
each series of shares are held separately by the custodian.
American Century offers four classes of the fund offered by this
Prospectus: an Investor Class, an Institutional Class, a Service Class, and the
Advisor Class. The shares offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The
Institutional Class and Service Class are primarily offered to institutional
investors or through institutional distribution channels, such as
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Advisor Class.
The difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the Investor Class of shares, call one of our
Investor Services Representatives at 1-800-345-2021. For information concerning
the Institutional or Service classes of shares, call one of our Institutional
Service Representatives at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.
Except as described below, all classes of shares of the fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into the Investor Class of the fund.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters which must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 19
NOTES
20 Notes American Century Investments
NOTES
Notes 21
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
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SH-BKT-7775 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
BENHAM
GROUP(R)
Cash Reserve
ADVISOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs. American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Cash Reserve
PROSPECTUS
MARCH 1, 1997
Cash Reserve
ADVISOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load and low-load
mutual funds covering a variety of investment opportunities. One of the money
market funds from our Benham Group is described in this Prospectus. Its
investment objective is listed on page 2 of this Prospectus. The other funds are
described in separate prospectuses.
The fund shares offered by this Prospectus (the Advisor Class shares) are
sold at their net asset value with no sales charges or commissions. The Advisor
Class shares are subject to Rule 12b-1 shareholder services and distribution
fees as described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY - BENHAM CASH RESERVE FUND
Cash Reserve is a money market fund which seeks to obtain maximum current
income consistent with the preservation of principal and maintenance of
liquidity. The fund intends to pursue its investment objective by investing
substantially all of its assets in a portfolio of money market instruments and
maintaining a weighted average maturity of not more than 90 days.
INVESTMENTS IN THE FUND ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER AGENCY. THERE IS NO ASSURANCE THAT THE FUND WILL BE
ABLE TO MAINTAIN A $1.00 SHARE PRICE.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund .....................................2
Transaction and Operating Expense Table ..............................4
Performance Information of Other Class ...............................5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ......................................6
Cash Reserve ......................................................6
Other Investment Practices, Their Characteristics and Risks ..........6
Repurchase Agreements .............................................6
Derivative Securities .............................................7
Portfolio Lending .................................................7
Foreign Securities ................................................8
When-Issued Securities ............................................8
Rule 144A Securities ..............................................8
Performance Advertising ..............................................8
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American Century Funds .....................10
How to Exchange From One American Century Fund to Another ...........10
How to Redeem Shares ................................................10
Telephone Services ..................................................10
Investors Line ...................................................10
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................................11
When Share Price Is Determined ...................................11
How Share Price Is Determined ....................................11
Where to Find Yield Information ..................................11
Distributions .......................................................11
Taxes ...............................................................12
Tax-Deferred Accounts ............................................12
Taxable Accounts .................................................12
Management ..........................................................12
Investment Management ............................................12
Code of Ethics ...................................................13
Transfer and Administrative Services .............................13
Distribution of Fund Shares .........................................13
Service and Distribution Fees ....................................14
Further Information About American Century ..........................14
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Cash
Reserve
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases ............................. none
Maximum Sales Load Imposed on Reinvested Dividends .................. none
Deferred Sales Load ................................................. none
Redemption Fee ...................................................... none
Exchange Fee ........................................................ none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees ..................................................... 0.45%
12b-1 Fees(1) ....................................................... 0.50%
Other Expenses(2) ................................................... 0.00%
Total Fund Operating Expenses ....................................... 0.95%
EXAMPLE
You would pay the following expenses on a 1 year $ 10
$1,000 investment, assuming a 5% annual return and 3 years 30
redemption at the end of each time period: 5 years 52
10 years 116
(1) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the manager, and a portion is used to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page 14.
(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of Cash Reserve offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Advisor Class shares. The fund
offers two other classes of shares, one of which is primarily made available to
retail investors and one that is primarily made available to institutional
investors. The other classes have different fee structures than the Advisor
Class. The difference in the fee structures among the classes is the result of
their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. Accordingly, the core investment advisory expenses
do not vary by class. A difference in fees will result in different performance
for those classes. For additional information about the various classes, see
"Further Information About American Century," page 14.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
CASH RESERVE
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the fund for the time periods presented, the fund's
performance information would be lower as a result of the additional expense.
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income .05 .05 .03 .02 .04 .06 .07 .08 .07 .06
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income (.05) (.052) (.032) (.023) (.037) (.058) (.074) (.083) (.065) (.056)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) 4.99% 5.38% 3.21% 2.30% 3.74% 5.95% 7.67% 8.66% 6.73% 5.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .70% .70% .80% 1.00% .98%(3) .97%(3) 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment
Income to Average
Net Assets 4.88% 5.27% 3.18% 2.30% 3.62% 5.75% 7.40% 8.35% 6.52% 5.80%
Net Assets, End of
Year (in millions) $1,347 $1,470 $1,299 $1,256 $1,488 $1,236 $954 $639 $489 $448
(1) The data presented has been restated to give effect to a 100 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "An Explanation of Fixed Income Securities Ratings" in the
Statement of Additional Information.
CASH RESERVE
Cash Reserve seeks to obtain a level of current income consistent with
preservation of capital and maintenance of liquidity. Cash Reserve is designed
for investors who want income and no fluctuation in their principal.
Cash Reserve expects, but cannot guarantee, that it will maintain a
constant share price of $1.00. The fund follows industry-standard guidelines on
the quality and maturity of its investments, purchasing only securities having
remaining maturities of not more than 13 months and by maintaining a weighted
average portfolio maturity of not more than 90 days.
Cash Reserve invests substantially all of its assets in a diversified
portfolio of U.S. dollar denominated high quality money market instruments,
consisting of:
(1) Securities issued or guaranteed by the U.S. government and its
agencies and instrumentalities
(2) Commercial Paper
(3) Certificates of Deposit and Euro Dollar Certificates of Deposit
(4) Bankers' Acceptances
(5) Short-term notes, bonds, debentures, or other debt instruments
(6) Repurchase agreements
These classes of securities may be held in any proportion, and such
proportion may vary as market conditions change.
All portfolio holdings are limited to those which at the time of purchase
have a short-term rating of A-1 by Standard & Poor's Corporation ("S&P") or P-1
by Moody's Investors Services ("Moody's"), or if they have no short-term rating
are issued or guaranteed by an entity having a long-term rating of at least AA
by S&P or Aa by Moody's.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions present
an attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposi-
6 Information Regarding the Fund American Century Investments
tion of the collateral may be delayed or limited. To the extent the value of
the security decreases, the fund could experience a loss.
The fund will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the fund's Board of Directors.
The fund may invest in repurchase agreements with respect to any security
in which the fund is authorized to invest, even if the remaining maturity of the
underlying security would make that security ineligible for purchase by such
fund. The fund will not invest more than 10% of its assets in repurchase
agreements maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund
may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
The fund may not invest in a derivative security unless the reference index
or the instrument to which it relates is an eligible investment for the fund.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or
other financial asset will not move in the direction the portfolio
manager anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the
exchange, either of which may make it difficult or impossible to close
out a position when desired;
o the risk that adverse price movements in an instrument can result in a
loss substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including, if
applicable, the right to call the loan to enable the fund to vote the
securities. Such loans may not exceed one-third of the fund's net assets taken
at market. Interest on loaned
Prospectus Information Regarding the Fund 7
securities may not exceed 10% of the annual gross income of the fund (without
offset for realized capital gains). The portfolio lending policy described in
this paragraph is a fundamental policy that may be changed only by a vote of
fund shareholders.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities of
foreign issuers, including foreign governments, when these securities meet its
standards of selection. Securities of foreign issuers may trade in the U.S. or
foreign securities markets. The fund will limit its purchase of debt securities
to U.S. dollar denominated obligations. Such securities will be primarily from
developed markets.
Investments in foreign securities may present certain risks, including
those resulting from future political and economic developments, reduced
availability of public information concerning issuers, and the fact that foreign
issuers are not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory practices and requirements comparable
to those applicable to domestic issuers.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued
basis without the limit when, in the opinion of the manager, such purchases will
further the investment objectives of the fund. The price of when-issued
securities is established at the time the commitment to purchase is made.
Delivery of and payment for these securities typically occurs 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
when-issued security. Accordingly, the value of each security may decline prior
to delivery, which could result in a loss to the fund. A separate account for
the fund consisting of cash or high-quality liquid debt securities in an amount
at least equal to the when-issued commitments will be established and maintained
with the custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and the fund may, from time to time, hold a Rule 144A
security that is illiquid. In such an event, the fund's manager will consider
appropriate remedies to minimize the effect on the fund's liquidity. The fund
may not invest more than 10% of its assets in illiquid securities (securities
that may not be sold within seven days at approximately the price used in
determining the net asset value of fund shares).
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield and
effective yield. Performance data may be quoted separately for the Advisor Class
and for the other classes offered by the fund.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
8 Information Regarding the Fund American Century Investments
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. In the case of Cash
Reserve, yield is calculated by measuring the income generated by an investment
in the fund over a seven-day period (net of fund expenses). This income is then
"annualized." That is, the amount of income generated by the investment over the
seven-day period is assumed to be generated over each similar period each week
throughout a full year and is shown as a percentage of the investment. The
"effective yield" is calculated in a similar manner but, when annualized, the
income earned by the investment is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of the
assumed reinvestment.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes,
the fund's yield may not equal the income paid on your shares or the income
reported in the fund's financial statements.
The fund may also include in advertisements data comparing performance with
the performance of non-related investment media, published editorial comments
and performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Donoghue's Money Fund Average and the Bank Rate
Monitor National Index of 2 1/2-year CD rates. Fund performance may also be
compared, on a relative basis, to other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results.
Prospectus Information Regarding the Fund 9
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the Cash Reserve Fund offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN
CENTURY FUNDS
The fund offered by this Prospectus is available as an investment option
under your employer-sponsored retirement or savings plan or through or in
connection with a program, product or service offered by a financial
intermediary, such as a bank, broker-dealer or insurance company. Since all
records of your share ownership are maintained by your plan sponsor, plan
recordkeeper, or other financial intermediary, all orders to purchase, exchange
and redeem shares must be made through your employer or other financial
intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select American
Century funds as an investment option.
If you are purchasing through a financial intermediary, you should contact
your service representative at the financial intermediary for information about
how to select American Century funds.
If you have questions about the fund, see "Investment Policies of the
Fund," page 6, or call one of our Institutional Service Representatives at
1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See
"When Share Price is Determined," page 11.
We may discontinue offering shares generally in the fund (including any
class of shares of the fund) or in any particular state without notice to
shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY
FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the
shares of the fund for shares of another fund in our family. See your plan
administrator, employee benefits office or financial intermediary for details on
the rules in your plan governing exchanges.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan or
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price Is Determined," page 11. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get
answers to any questions that you may have about the funds and the services we
offer, call one of our Institutional Service Representatives at 1-800-345-3533.
10 How To Invest With American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. The net asset values for Target Maturities funds are determined one hour
prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the time as of which
the net asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined as of, the close
of the Exchange on the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which net asset value of the
fund is determined.
It is the responsibility of your plan recordkeeper or financial
intermediary to transmit your purchase, exchange and redemption requests to the
fund's transfer agent prior to the applicable cut-off time for receiving orders
and to make payment for any purchase transactions in accordance with the fund's
procedures or any contractual arrangements with the fund or the fund's
distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The securities held by the fund are valued on the basis of amortized cost.
This method involves initially valuing a security at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium paid at
the time of the purchase, rather than determining the security's market value
from day to day.
WHERE TO FIND YIELD INFORMATION
The yield of the Investor Class of Cash Reserve is published weekly in
leading financial publications and daily in many local newspapers. Because the
total expense ratio for the Advisor Class shares is 0.25% higher than the
Investor Class shares, the yield will be lower than the Investor Class. Yield
information of the Advisor Class may be obtained by calling us.
DISTRIBUTIONS
At the close of each day, including Saturdays, Sundays and holidays, net
income plus net realized gains on portfolio securities is determined and
declared as a distribution. The distribution will be paid monthly on the last
Friday of each month, except for year-end distributions which will be paid on
the last business day of the year.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," above. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Cash Reserve does not expect to realize any long-term capital gains, and
accordingly, does not expect to pay any capital gains distributions.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held
Prospectus Additional Information You Should Know 11
up to 15 days. You may elect to have distributions on shares held in Individual
Retirement Accounts and 403(b) plans paid in cash only if you are at least 59
1/2 years old or permanently and totally disabled. Distribution checks normally
are mailed within seven days after the record date.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
fixed income funds do not qualify for the 70% dividends-received deduction for
corporations since they are derived from interest income. Distributions from net
long-term capital gains are taxable as long-term capital gains regardless of the
length of time the shares on which such distributions are paid have been held by
the shareholder.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested.
In January of the year following the distribution, if you own shares in
taxable accounts, you will receive a Form 1099-DIV notifying you of the status
of your distributions for federal income tax purposes.
Distributions to taxable accounts may also be subject to state and local
taxes, even if all or a substantial part of such distributions are derived from
interest on U.S. government obligations which, if you received them directly,
would be exempt from state income tax. However, most but not all states allow
this tax exemption to pass through to fund shareholders when a fund pays
distributions to its shareholders. You should consult your tax advisor about the
tax status of such distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, either we or your financial intermediary is required by
federal law to withhold and remit to the IRS 31% of reportable payments (which
may include dividends, capital gains distributions and redemptions). Those
regulations require you to certify that the Social Security number or tax
identification number you provide is correct and that you are not subject to 31%
withholding for previous under-reporting to the IRS. You will be asked to make
the appropriate certification on your application. Payments reported by us that
omit your Social Security number or tax identification number will subject us to
a penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed, and is not
refundable.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc. serves as the investment manager of the
fund. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri, 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
12 Additional Information You Should Know American Century Investments
manager, while certain employees provide investment management services to funds
managed by BMC.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the portfolio and the asset mix as it deems appropriate in pursuit of the fund's
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the fund or of sectors of the fund as necessary
between team meetings.
The portfolio manager members of the teams managing the fund described in
this Prospectus and their work experience for the last five years are as
follows:
ROBERT V. GAHAGAN, Vice President and Portfolio Manager, has worked for
American Century since May 1983. He became a Portfolio Manager in December
1991. Prior to that he served as Assistant Portfolio Manager.
AMY O'DONNELL joined American Century in 1988, becoming a member of its
portfolio department in 1988. In 1992 she assumed her current position as a
portfolio manager of three American Century funds.
The activities of the manager are subject only to directions of the fund's
Board of Directors. The manager pays all the expenses of the fund except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager receives an annual fee
of 0.45% of the average net assets of Cash Reserve.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the fund by
the aggregate average daily closing value of the fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to portfolio
managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage the fund.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer agent and dividend-paying agent for the fund.
It provides facilities, equipment and personnel to the fund and is paid for such
services by the manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the fund's Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the fund's investment
manager. As agent for the fund and the manager, the distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries with respect to the sale of the fund's shares and/or
the use of the fund's shares in
Prospectus Additional Information You Should Know 13
various financial services. The manager (or an affiliate) pays all expenses
incurred in promoting sales of, and distributing, the Advisor Class and in
securing such services out of the Rule 12b-1 fees described in the section that
follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under
the Investment Company Act permits investment companies that adopt a written
plan to pay certain expenses associated with the distribution of their shares.
Pursuant to that rule, the fund's Board of Directors and the initial shareholder
of the fund's Advisor Class shares have approved and adopted a Master
Distribution and Shareholder Services Plan (the "Plan") with the manager.
Pursuant to the Plan, the fund pays the manager services fee and a distribution
fee, each equal to 0.25% (for a total of 0.50%) per annum of the average daily
net assets of the shares of the fund's Advisor Class. The shareholder services
fee is paid for the purpose of paying the costs of securing certain shareholder
and administrative services, and the distribution fee is paid for the purpose of
paying the costs of providing various distribution services. All or a portion of
such fees are paid by the the manager to the banks, broker-dealers, insurance
companies or other financial intermediaries through which such shares are made
available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and therefore may constitute "service fees" for purposes of applicable
rules of the National Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the fund, was organized
as a Maryland corporation on July 2, 1990. The corporation commenced operations
on February 28, 1991, the date it merged with Twentieth Century Investors, Inc.,
a Delaware corporation which had been in business since October 1958. Pursuant
to the terms of the Agreement and Plan of Merger dated July 27, 1990, the
Maryland corporation was the surviving entity and continued the business of the
Delaware corporation with the same officers and directors, the same shareholders
and the same investment objectives, policies and restrictions.
The principal office of the fund is American Century Tower, 4500 Main
Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-3533
(international calls: 816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value
shares. Each series is commonly referred to as a fund. The assets belonging to
each series of shares are held separately by the custodian.
American Century offers three classes of the fund offered by this
Prospectus: an Investor Class, a Service Class, and the Advisor Class. The
shares offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The
Service Class is primarily offered to institutional investors or through
institutional distribution channels, such as employer-sponsored retirement plans
or through banks, broker-dealers, insurance companies or other financial
intermediaries. The other classes have different fees, expenses, and/or minimum
investment requirements than the Advisor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
Different fees and expenses will affect performance. For additional information
concerning the Investor Class of shares, call one of our Investor Services
Representatives at 1-800-345-2021. For information concerning the Service Class
of shares, call one of our Institutional Service Representatives at
1-800-345-3533 or contact a sales representative or financial intermediary who
offers that class of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses
14 Additional Information You Should Know American Century Investments
specific to that class, (b) each class has a different identifying designation
or name, (c) each class has exclusive voting rights with respect to matters
solely affecting such class, and (d) each class may have different exchange
privileges.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. The manager will assist in the communication
with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 15
NOTES
16 Notes
NOTES
Notes 17
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7767 Recycled
<PAGE>
PROSPECTUS
[american century]
American
Century(sm)
MARCH 1, 1997
Benham
Group(R)
Short-Term Government Fund
Intermediate-Term Government Fund
ADVISOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your investment needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.
American Century Investments
Benham Group(R) American Century Group Twentieth Century(R) Group
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Short-Term
Government Fund
Intermediate-Term
Government Fund
PROSPECTUS
MARCH 1, 1997
Short-Term Government Fund
Intermediate-Term Government Fund
ADVISOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century Investments, a
family of funds that includes nearly 70 no-load and low-load mutual funds
covering a variety of investment opportunities. Two of the funds from our Benham
Group that invest primarily in debt instruments of the U.S. government and its
agencies are described in this Prospectus. Their investment objectives are
listed on page 2 of this Prospectus. The other funds are described in separate
prospectuses.
Each fund's shares offered in this Prospectus (the Advisor Class shares) are
sold at their net asset value with no sales charges or commissions. The Advisor
Class shares are subject to Rule 12b-1 shareholder services and distribution
fees as described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY -- BENHAM SHORT-TERM GOVERNMENT FUND
The Short-Term Government Fund seeks a competitive level of income. The fund
intends to pursue its investment objective by investing in securities of the
U.S. government and its agencies and maintaining a weighted average maturity of
three years or less.
AMERICAN CENTURY -- BENHAM INTERMEDIATE-TERM GOVERNMENT FUND
The Intermediate-Term Government Fund seeks a competitive level of income. The
fund intends to pursue its investment objective by investing in securities of
the U.S. government and its agencies and maintaining a weighted average maturity
of three to 10 years.
There is no assurance that the funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds....................................2
Transaction and Operating Expense Table...............................4
Performance Information of Other Class................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds......................................7
Short-Term Government Fund and
Intermediate-Term Government Fund................................7
Fundamentals of Fixed Income Investing................................8
Other Investment Practices, Their Characteristics
and Risks..........................................................9
Portfolio Turnover.................................................9
Repurchase Agreements..............................................9
Derivative Securities..............................................9
Portfolio Lending.................................................10
When-Issued Securities............................................10
Performance Advertising..............................................11
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American
Century Funds.....................................................12
How to Exchange from One
American Century Fund to Another..................................12
How to Redeem Shares.................................................12
Telephone Services...................................................12
Investors Line....................................................12
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price..........................................................13
When Share Price Is Determined....................................13
How Share Price Is Determined.....................................13
Where to Find Information About Share Price.......................13
Distributions........................................................13
Taxes................................................................14
Tax-Deferred Accounts.............................................14
Taxable Accounts..................................................14
Management...........................................................15
Investment Management.............................................15
Code of Ethics....................................................16
Transfer and Administrative Services..............................16
Distribution of Fund Shares..........................................16
Service and Distribution Fees.....................................16
Further Information About American Century...........................17
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Intermediate-Term Short-Term
Government Fund Government Fund
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C>
Maximum Sales Load Imposed on Purchases.....................................................none none
Maximum Sales Load Imposed on Reinvested Dividends..........................................none none
Deferred Sales Load.........................................................................none none
Redemption Fee..............................................................................none none
Exchange Fee................................................................................none none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees............................................................................0.50% 0.45%
12b-1 Fees(1)..............................................................................0.50% 0.50%
Other Expenses(2)..........................................................................0.00% 0.00%
Total Fund Operating Expenses..............................................................1.00% 0.95%
EXAMPLE
You would pay the following expenses on a 1 year $10 $10
$1,000 investment, assuming a 5% annual return and 3 years 32 30
redemption at the end of each time period: 5 years 55 52
10 years 122 116
(1) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the manager, and a portion is used to
compensate them for distribution and other shareholder services. See
"Distribution of Fund Shares," page 16.
(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year.
</TABLE>
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the funds offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Advisor Class shares. The funds offer
two other classes of shares, one of which is primarily made available to retail
investors and one that is primarily made available to institutional investors.
The other classes have different fee structures than the Advisor Class. The
difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. A difference in fees will result in different performance for
those classes. For additional information about the various classes, see
"Further Information About American Century," page 17.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
SHORT-TERM GOVERNMENT FUND
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the fund for the time periods presented, the fund's
performance information would be lower as a result of the additional expense.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period....................$9.51 $9.27 $9.67 $9.61 $9.41 $9.08 $9.32 $9.42 $9.55 $10.16
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations
Net Investment Income .................51 .52 .40 .36 .44 .63 .79 .84 .81 .79
Net Realized and Unrealized
Gain (Loss) on
Investment Transactions..............(.04) .24 (.40) .06 .20 .33 (.24) (.10) (.13) (.49)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Income from
Investment Operations..................47 .76 -- .42 .64 .96 .55 .74 .68 .30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions
From Net Investment Income...........(.51) (.519) (.402) (.36) (.441) (.635) (.789) (.843) (.815) (.792)
From Net Realized Gains
on Investment Transactions...........-- -- -- -- -- -- -- -- -- (.122)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions..................(.51) (.519) (.402) (.36) (.441) (.635) (.789) (.843) (.815) (.914)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period.........$9.47 $9.51 $9.27 $9.67 $9.61 $9.41 $9.08 $9.32 $9.42 $9.55
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return(2)......................5.09% 8.42% .07% 4.45% 6.85% 10.99% 6.28% 8.36% 7.44% 3.14%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets.................70% .70% .81% 1.00% .99%(3) .99%(3) 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
to Average Net Assets...............5.39% 5.53% 4.17% 3.73% 4.62% 6.88% 8.64% 9.10% 8.60% 8.10%
Portfolio Turnover Rate..............246% 128% 470% 413% 391% 779% 620% 567% 578% 468%
Net Assets, End
of Period (in thousands).........$349,772 $391,331 $396,753 $511,981 $569,430$534,515 $455,536 $443,475 $440,380$335,601
(1) The data presented has been restated to give effect to a 10 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
INTERMEDIATE-TERM GOVERNMENT FUND
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the fund for the time periods presented, the fund's
performance information would be lower as a result of the additional expense.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31, except as noted.
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............................. $10.04 $9.55 $10.00
-------- -------- --------
Income from Investment Operations
Net Investment Income ......................................... .54 .58 .34
Net Realized and Unrealized Gain (Loss) ....................... (.14) .49 (.45)
-------- -------- --------
Total from Investment Operations............................... .40 1.07 (.11)
-------- -------- --------
Distributions
From Net Investment Income..................................... (.54) (.583) (.343)
From Net Realized Gain on Investment Transactions.............. (.06) -- --
-------- -------- --------
Total Distributions............................................ (.60) (.583) (.343)
-------- -------- --------
Net Asset Value, End of Period.................................... $9.84 $10.04 $9.55
======== ======== ========
Total Return(2)................................................ 4.12% 11.58% (1.01%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets.............. .74% .74% .75%(3)
Ratio of Net Investment Income to Average Net Assets........... 5.50% 5.99% 5.43%(3)
Portfolio Turnover Rate........................................ 112% 137% 205%
Net Assets, End of Period (in thousands)....................... $24,422 $21,981 $6,280
(1) March 1, 1994 (inception) through October 31, 1994.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.
(3) Annualized.
</TABLE>
6 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth in the
Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "An Explanation of Fixed Income Securities Ratings" in the
Statement of Additional Information.
SHORT-TERM GOVERNMENT FUND AND INTERMEDIATE-TERM GOVERNMENT FUND
These funds seek to provide a competitive level of income and limited price
volatility by investing in securities of the U.S. government and its agencies,
securities that are considered to be of the highest credit quality.
The two funds differ in the weighted average maturities of their portfolios and
accordingly, in their degree of risk and level of income. Generally, the longer
the weighted average maturity of a fund's portfolio, the higher the yield and
the greater the price volatility.
The Short-Term Government Fund will maintain a weighted average portfolio
maturity of three years or less. The fund is designed for investors who can
accept some fluctuation in principal in order to earn a higher level of current
income than is generally available from money market securities, but who do not
want as much price volatility as is inherent in longer-term securities.
The Intermediate-Term Government Fund will maintain a weighted average portfolio
maturity of three to 10 years. The fund is designed for investors seeking a
higher level of current income than is generally available from shorter-term
government securities and who are willing to accept a greater degree of price
fluctuation.
The market value of the securities in which the Short-Term Government Fund and
Intermediate-Term Government Fund invest will fluctuate, and accordingly, the
value of your shares will vary from day to day. See "Fundamentals of Fixed
Income Investing," page 8.
Both funds may invest in (1) direct obligations of the United States, such as
Treasury bills, notes and bonds, which are supported by the full faith and
credit of the United States, and (2) obligations (including mortgage-related
securities) issued or guaranteed by agencies and instrumentalities of the U.S.
government that are established under an act of Congress. The securities of some
of these agencies and instrumentalities, such as the Government National
Mortgage Association, are guaranteed as to principal and interest by the U.S.
Treasury, and other securities are supported by the right of the issuer, such as
the Federal Home Loan Banks, to borrow from the Treasury. Other obligations,
including those issued by the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality.
Mortgage-related securities in which the funds may invest include collateralized
mortgage obligations ("CMOs") issued by a U.S. agency or instrumentality. A CMO
is a debt security that is collateralized by a portfolio or pool of mortgages or
mortgage-backed securities. The issuer's obligation to make interest and
principal payments is secured by the underlying pool or portfolio of mortgages
or securities.
The market value of mortgage-related securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of principal
and interest by the U.S. government, is not insured. When interest rates rise,
the market value of those
Prospectus Information Regarding the Funds 7
securities may decrease in the same manner as other debt, but when interest
rates decline, their market value may not increase as much as other debt
instruments because of the prepayment feature inherent in the underlying
mortgages. If such securities are purchased at a premium, the fund will suffer a
loss if the obligation is prepaid. Prepayments will be reinvested at prevailing
rates, which may be less than the rate paid by the prepaid obligation.
For the purpose of determining the weighted average portfolio maturity of the
funds, the manager will consider the maturity of a mortgage-related security to
be the remaining expected average life of the security. The average life of such
securities is likely to be substantially less than the original maturity as a
result of prepayments of principal on the underlying mortgages, especially in a
declining interest rate environment. In determining the remaining expected
average life, the manager makes assumptions regarding prepayments on underlying
mortgages. In a rising interest rate environment, those prepayments generally
decrease, and may decrease below the rate of prepayment assumed by the manager
when purchasing those securities. Such slowdown may cause the remaining maturity
of those securities to lengthen, which will increase the relative volatility of
those securities and, hence, the fund holding the securities.
FUNDAMENTALS OF FIXED INCOME INVESTING
HISTORICAL YIELDS
[line graph - graph data]
30-YEAR 20-YEAR 3-MONTH
TREASURY TAX-EXEMPT TREASURY
BONDS BONDS BILLS
1/92 8% 6% 4%
2/92 8% 6% 4%
3/92 8% 6% 4%
4/92 8% 6% 4%
5/92 8% 6% 4%
6/92 8% 6% 4%
7/92 7% 6% 3%
8/92 7% 6% 3%
9/92 7% 6% 3%
10/92 8% 6% 3%
11/92 8% 6% 3%
12/92 7% 6% 3%
1/93 7% 6% 3%
2/93 7% 5% 3%
3/93 7% 6% 3%
4/93 7% 6% 3%
5/93 7% 6% 3%
6/93 7% 5% 3%
7/93 7% 5% 3%
8/93 6% 5% 3%
9/93 6% 5% 3%
10/93 6% 5% 3%
11/93 6% 5% 3%
12/93 6% 5% 3%
1/94 6% 5% 3%
2/94 7% 5% 3%
3/94 7% 6% 4%
4/94 7% 6% 4%
5/94 7% 6% 4%
6/94 8% 6% 4%
7/94 7% 6% 4%
8/94 7% 6% 5%
9/94 8% 6% 5%
10/94 8% 6% 5%
11/94 8% 7% 6%
12/94 8% 6% 6%
1/95 8% 6% 6%
2/95 7% 6% 6%
3/95 7% 6% 6%
4/95 7% 6% 6%
5/95 7% 6% 6%
6/95 7% 6% 6%
7/95 7% 6% 6%
8/95 7% 6% 5%
9/95 7% 6% 5%
10/95 6% 5% 6%
11/95 6% 5% 5%
12/95 6% 5% 5%
1/96 6% 5% 5%
2/96 6% 5% 5%
3/96 7% 6% 5%
4/96 7% 6% 5%
5/96 7% 6% 5%
6/96 7% 6% 5%
7/96 7% 6% 5%
8/96 7% 6% 5%
9/96 7% 6% 5%
10/96 7% 6% 5%
11/96 6% 6% 5%
12/96 7% 6% 5%
BOND PRICE VOLATILITY
For a given change in interest rates, longer maturity bonds experience a greater
change in price, as shown below:
Price of a 7% Price of same
coupon bond bond if its Percent
Years to now trading yield increases change
Maturity to yield 7% to 8% in price
1 year $100.00 $99.06 -0.94%
3 years 100.00 97.38 -2.62%
10 years 100.00 93.20 -6.80%
30 years 100.00 88.69 -11.31%
YEARS TO MATURITY
[bar graph data]
SHORT-TERM GOVERNMENT FUND
Likely Maturities of Individual Holdings 0-8 years
Expected Weighted Average Portfolio Maturity Range 6 mos.-5 years
INTERMEDIATE-TERM GOVERNMENT FUND
Likely Maturities of Individual Holdings 0-20 years
Expected Weighted Average Portfolio Maturity Range 5-10 years
Over time, the level of interest rates available in the marketplace changes. As
prevailing rates fall, the prices of bonds and other securities that trade on a
yield basis rise. On the other hand, when prevailing interest rates rise, bond
prices fall.
Generally, the longer the maturity of a debt security, the higher its yield and
the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds, to change. If sustained
over time, it would also have the impact of raising or lowering the yield of the
fund.
In addition to the risk arising from fluctuating interest rate levels, debt
securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond ratings
take into account the relative likelihood that such timely payment will occur.
As a result, lower-rated bonds tend to sell at higher yield levels than
top-rated bonds of similar maturity.
8 Information Regarding the Funds American Century Investments
AUTHORIZED QUALITY RANGES
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
Short-Term
Government
Fund x
Intermediate-Term
Government
Fund x
In addition, as economic, political and business developments unfold,
lower-quality bonds, which possess lower levels of protection with regard to
timely payment, usually exhibit more price fluctuation than do higher-quality
bonds of like maturity.
The investment practices of our fixed income funds take into account these
relationships. The portfolio maturity of each fund has implications for the
degree of price volatility and the yield level to be expected from each.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the financial information
on pages 5 and 6 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives. The
manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost that the funds pay directly.
Portfolio turnover may also affect the character of capital gains, if any,
realized and distributed by a fund since short-term capital gains are taxable as
ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase obligation,
a repurchase agreement can be considered a loan collateralized by the security
purchased. The fund's risk is the ability of the seller to pay the agreed-upon
repurchase price on the repurchase date. If the seller defaults, the fund may
incur costs in disposing of the collateral, which would reduce the amount
realized thereon. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the value
of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued by
the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the funds' Board of Directors.
Each of the funds may invest in repurchase agreements with respect to any
security in which that fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such fund. No fund will invest more than 15% of its assets in
repurchase agreements maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of the
funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities
Prospectus Information Regarding the Funds 9
whose value or performance is linked to other equity securities (such as
depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed securities
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices, or currency exchange rates and for cash management purposes as a
low-cost method of gaining exposure to a particular securities market without
investing directly in those securities.
No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a bond whose interest rate is indexed to the return on two-year
treasury securities would be a permissible investment (assuming it otherwise
meets the other requirements for the funds), while a security whose underlying
value is linked to the price of oil would not be a permissible investment since
the funds may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the Board will
review the manager's policy for investments in derivative securities annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including, if
applicable, the right to call the loan to enable the fund to vote the
securities. Such loans may not exceed one-third of the fund's net assets taken
at market. Interest on loaned securities may not exceed 10% of the annual gross
income of the fund (without offset for realized capital gains). The portfolio
lending policy described in this paragraph is a fundamental policy that may be
changed only by a vote of fund shareholders.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without the limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time the commitment to purchase is
made. Delivery of and payment for these securities typically occurs 15 to 45
days after the commitment to purchase. Market rates of interest on debt
securities at the time of delivery may be higher or lower than those contracted
for on the when-issued security. Accordingly, the value of each security may
decline prior to delivery, which
10 Information Regarding the Funds American Century Investments
could result in a loss to the fund. A separate account for each fund consisting
of cash or high-quality liquid debt securities in an amount at least equal to
the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund performance
may be shown by presenting one or more performance measurements, including
cumulative total return or average annual total return, and yield. Performance
data may be quoted separately for the Advisor Class and for the other classes
offered by the funds.
Cumulative total return data is computed by considering all elements of return,
including reinvestment of dividends and capital gains distributions, over a
stated period of time. Average annual total return is determined by computing
the annual compound return over a stated period of time that would have produced
the fund's cumulative total return over the same period if the fund's
performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period expressed as
a percentage of the fund's share price. Yield is calculated by adding over a
30-day (or one-month) period all interest and dividend income (net of fund
expenses) calculated on each day's market values, dividing this sum by the
average number of fund shares outstanding during the period, and expressing the
result as a percentage of the fund's share price on the last day of the 30-day
(or one-month) period. The percentage is then annualized. Capital gains and
losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized in
accordance with SEC rules for all stock and bond funds. Because yield accounting
methods differ from the methods used for other accounting purposes, a fund's
yield may not equal the income paid on your shares or the income reported in a
fund's financial statements.
The funds may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Donoghue's Money Fund Average and the Bank Rate
Monitor National Index of 21/2-year CD rates. Fund performance may also be
compared, on a relative basis, to other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Funds 11
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the funds offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN
CENTURY FUNDS
One or more of the funds offered by this Prospectus is available as an
investment option under your employer-sponsored retirement or savings plan or
through or in connection with a program, product or service offered by a
financial intermediary, such as a bank, broker-dealer or an insurance company.
Since all records of your share ownership are maintained by your plan sponsor,
plan recordkeeper, or other financial intermediary, all orders to purchase,
exchange and redeem shares must be made through your employer or other financial
intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the administrator of
your plan or your employee benefits office can provide you with information on
how to participate in your plan and how to select American Century funds as an
investment option.
If you are purchasing through a financial intermediary, you should contact your
service representative at the financial intermediary for information about how
to select American Century funds.
If you have questions about a fund, see "Investment Policies of the Funds," page
7, or call one of our Institutional Service Representatives at 1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See "When
Share Price is Determined," page 13.
We may discontinue offering shares generally in the funds (including any class
of shares of a fund) or in any particular state without notice to shareholders.
HOW TO EXCHANGE FROM ONE
AMERICAN CENTURY FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the shares of
a fund for shares of another fund in our family. See your plan administrator,
employee benefits office or financial intermediary for details on the rules in
your plan governing exchanges.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan or
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price Is Determined," page 13. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get answers
to any questions that you may have about the funds and the services we offer,
call one of our Institutional Service Representatives at 1-800-345-3533.
12 How to Invest with American Century Investments American Century Investments
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net asset
value is determined by calculating the total value of a fund's assets, deducting
total liabilities and dividing the result by the number of shares outstanding.
For all American Century funds, except the funds issued by the American Century
Target Maturities Trust, net asset value is determined at the close of regular
trading on each day that the New York Stock Exchange is open, usually 3 p.m.
Central time. The net asset value for the Target Maturities funds are determined
one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after we receive your investment, redemption or exchange
request. For example, investments and requests to redeem or exchange shares of a
fund received by us or our agent before the time as of which the net asset value
of the fund is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on the next day
the Exchange is open.
Investments are considered received only when payment is received by us. Wired
funds are considered received on the day they are deposited in our bank account
if they are deposited before the time as of which the net asset value of the
fund is determined.
It is the responsibility of your plan recordkeeper or financial intermediary to
transmit your purchase, exchange and redemption requests to the funds' transfer
agent prior to the applicable cut-off time for receiving orders and to make
payment for any purchase transactions in accordance with the funds' procedures
or any contractual arrangements with the funds or the funds' distributor in
order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of each fund, except as otherwise noted, are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in accordance with procedures adopted by
the Board of Directors.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds are published in leading
newspapers daily. Because the total expense ratio for the Advisor Class shares
is 0.25% higher than the Investor Class, their net asset values will be lower
than the Investor Class. Net asset value of the Advisor Class of the funds may
be obtained by calling us.
DISTRIBUTIONS
At the close of each day, including Saturdays, Sundays and holidays, net income
is determined and declared as a distribution. The distribution will be paid
monthly on the last Friday of each month, except for year-end distributions,
which will be paid on the last business day of the year.
You will begin to participate in the distributions the day after your purchase
is effective. See "When Share Price is Determined," this page. If you redeem
shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are declared
and paid once a year, but the funds may make distributions on a more frequent
basis to comply with the distribution requirements of the Internal Revenue Code,
in all events in a manner
Prospectus Additional Information You Should Know 13
consistent with the provisions of the Investment Company Act.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
TAXES
Each fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If Advisor Class shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals from the plan.
TAXABLE ACCOUNTS
If Advisor Class shares are purchased through taxable accounts, distributions of
net investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
fixed income funds do not qualify for the 70% dividends-received deduction for
corporations since they are derived from interest income. Distributions from net
long-term capital gains are taxable as long-term capital gains, regardless of
the length of time the shares on which such distributions are paid have been
held by the shareholder. However, you should note that any loss realized upon
the sale or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to such shares.
Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in taxable
accounts, you will receive a Form 1099-DIV from either us or your financial
intermediary notifying you of the status of your distributions for federal
income tax purposes. The funds will advise shareholders of the percentage, if
any, of the dividends not exempt from federal income tax.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue Code,
either we or your financial intermediary is required by federal law to withhold
and remit to the IRS 31% of reportable payments (which may include dividends,
capital gains distributions and redemptions). Those regulations require you to
certify that the Social Security number or tax identification number you provide
is correct and that you are not subject to 31% withholding for previous
14 Additional Information You Should Know American Century Investments
under-reporting to the IRS. You will be asked to make the appropriate
certification on your application. Payments reported by us that omit your Social
Security number or tax identification number will subject us to a penalty of
$50, which will be charged against your account if you fail to provide the
certification by the time the report is filed, and is not refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
The Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the funds. Acting pursuant to an
investment management agreement entered into with the funds, American Century
Investment Management, Inc. serves as the manager of the funds. Its principal
place of business is American Century Tower, 4500 Main Street, Kansas City,
Missouri 64111. The manager has been providing investment advisory services to
investment companies and institutional clients since it was founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolios of each fund and
directs the purchase and sale of their investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the funds. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the funds' portfolios and the funds' asset mix as it deems appropriate in
pursuit of the funds' investment objectives. Individual portfolio manager
members of the team may also adjust portfolio holdings of the funds or of
sectors of the funds as necessary between team meetings.
The portfolio manager members of the teams managing the funds described in this
Prospectus and their work experience for the last five years are as follows:
C. CASEY COLTON, Portfolio Manager, joined BMC in 1990 as a Municipal Analyst.
He was promoted to his current position in 1995. Mr. Colton is a Chartered
Financial Analyst (CFA). He is a member of the team that manages the
Intermediate-Term Government Fund.
ROBERT V. GAHAGAN, Vice President and Portfolio Manager, has worked for American
Century since May 1983. He became a Portfolio Manager in December 1991. Prior to
that he served as Assistant Portfolio Manager. He is a member of the team that
manages the Short-Term Government Fund.
NEWLIN RANKIN, Portfolio Manager, joined BMC in 1994. He is a member of the team
that manages the Short-Term Government Fund. Prior to joining BMC, Mr. Rankin
was an Assistant Vice-President at Wells Fargo Bank from 1991 to 1993.
The activities of the manager are subject only to directions of the funds' Board
of Directors. The manager pays all the expenses of the funds except brokerage,
taxes, interest, fees and expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the funds, the manager receives an annual fee at
the following rates:
o 0.45% of the average net assets of Short-Term Government; and
o 0.50% of the average net assets of Intermediate-Term Government.
Prospectus Additional Information You Should Know 15
On the first business day of each month, each fund pays a management fee to the
manager for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for such fund by the
aggregate average daily closing value of each fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend-paying agent for the funds. It
provides facilities, equipment and personnel to the funds, and is paid for such
services by the manager.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services, Inc.,
a registered broker-dealer and an affiliate of the manager. As agent for the
funds and the manager, the distributor enters into contracts with various banks,
broker-dealers, insurance companies and other financial intermediaries with
respect to the sale of the funds' shares and/or the use of the funds' shares in
various financial services. The manager (or an affiliate) pays all expenses
incurred in promoting sales of, and distributing, the Advisor Class and in
securing such services out of the Rule 12b-1 fees described in the section that
follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under the
Investment Company Act permits investment companies that adopt a written plan to
pay certain expenses associated with the distribution of their shares. Pursuant
to that rule, the funds' Board of Directors and the initial shareholder of the
funds' Advisor Class shares have approved and adopted a Master Distribution and
Shareholder Services Plan (the "Plan"). Pursuant to the Plan, each fund pays the
manager a shareholder services fee and a distribution fee, each equal to 0.25%
(for a total of 0.50%) per annum of the average daily net assets of the shares
of the fund's Advisor Class. The shareholder services fee is paid for the
purpose of paying the costs of securing certain shareholder and administrative
services, and the distribution fee is paid for the purpose of paying the costs
of providing various distribution services. All or a portion of such fees are
paid by the manager to the banks, broker-dealers, insurance companies or other
financial intermediaries through which such shares are made available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and therefore may constitute "service fees" for purposes of applicable
rules of the National Association of Securities Dealers.
16 Additional Information You Should Know American Century Investments
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was organized as a
Maryland corporation on July 2, 1990. The corporation commenced operations on
February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a
Delaware corporation which had been in business since October 1958. Pursuant to
the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland
corporation was the surviving entity and continued the business of the Delaware
corporation with the same officers and directors, the same shareholders and the
same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main Street,
P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by
mail to that address, or by telephone to 1-800-345-3533 (international calls:
816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value shares.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
American Century offers three classes of each of the funds offered by this
Prospectus: an Investor Class, a Service Class, and an Advisor Class. The shares
offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The Service
Class is primarily made available to institutional investors or through
institutional distribution channels, such as employer-sponsored retirement plans
or through banks, broker-dealers, insurance companies or other financial
intermediaries. The other classes have different fees, expenses, and/or minimum
investment requirements than the Advisor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
Different fees and expenses will affect performance. For information concerning
the Investor Class of shares, call one of our Investor Services Representatives
at 1-800-345-2021. For information concerning the Service Class of shares, call
one of our Institutional Service Representatives at 1-800-345-3533 or contact a
sales representative or financial intermediary who offers the Service Class of
shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, and (d) each class
may have different exchange privileges.
Each share, irrespective of series or class, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for the
funds to hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' bylaws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the funds to hold a
special meeting of shareholders. The manager will assist in the communication
with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 17
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9702 [recycled logo]
SH-BKT-7771 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
BENHAM
GROUP(R)
Limited-Term Bond
Intermediate-Term Bond
Benham Bond
ADVISOR CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Limited-Term Bond
Intermediate-Term Bond
Benham Bond
PROSPECTUS
MARCH 1, 1997
Limited-Term Bond
Intermediate-Term Bond o Benham Bond
ADVISOR CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc., is a part of American Century
Investments, a family of funds that includes nearly 70 no-load and low-load
mutual funds covering a variety of investment opportunities. Three of the funds
from our Benham Group that invest primarily in fixed income or debt instruments
are described in this Prospectus. Their investment objectives are listed on page
2 of this Prospectus. The other funds are described in separate prospectuses.
Each fund's shares offered in this Prospectus (the Advisor Class shares)
are sold at their net asset value with no sales charges or commissions. The
Advisor Class shares are subject to Rule 12b-1 shareholder services and
distribution fees as described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY - BENHAM
LIMITED-TERM BOND FUND
The Limited-Term Bond Fund seeks income. The fund intends to pursue its
investment objective by investing in bonds and other debt obligations and
maintaining a weighted average maturity of five years or less.
AMERICAN CENTURY - BENHAM
INTERMEDIATE-TERM BOND FUND
The Intermediate-Term Bond Fund seeks a competitive level of income. The
fund intends to pursue its investment objective by investing in bonds and other
debt obligations and maintaining a weighted average maturity of three to 10
years.
AMERICAN CENTURY - BENHAM BOND FUND
The Benham Bond Fund seeks a high level of income. The fund intends to
pursue its investment objective by investing in bonds and other debt obligations
and maintaining a weighted average maturity of 10 years or greater. Effective
March 1, 1997 the fund's policy regarding portfolio weighted average will
change. As of that date, there will be no weighted average portfolio maturity
requirement for the fund, although it is expected that the fund will invest
primarily in intermediate and long-term bonds. You should consider this
impending policy change prior to making an investment in the fund.
There is no assurance that the funds will achieve their respective
investment objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds ...................................2
Transaction and Operating Expense Table ..............................4
Performance Information of Other Class................................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds .....................................8
Limited-Term Bond, Intermediate-Term Bond
and Benham Bond ................................................8
Fundamentals of Fixed Income Investing ..............................10
Other Investment Practices, Their Characteristics
and Risks ........................................................10
Portfolio Turnover ...............................................10
Repurchase Agreements ............................................11
Derivative Securities ............................................11
Portfolio Lending ................................................12
Foreign Securities ...............................................12
When-Issued Securities ...........................................12
Rule 144A Securities .............................................12
Interest Rate Futures Contracts and
Options Thereon ...............................................13
Performance Advertising ..........................................14
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell American
Century Funds ....................................................15
How to Exchange from One American Century
Fund to Another ..................................................15
How to Redeem Shares ................................................15
Telephone Services ..................................................15
Investors Line ...................................................15
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................................16
When Share Price Is Determined ...................................16
How Share Price Is Determined ....................................16
Where to Find Information About Share Price ......................17
Distributions .......................................................17
Taxes ...............................................................17
Tax-Deferred Accounts ............................................17
Taxable Accounts .................................................17
Management ..........................................................18
Investment Management ............................................18
Code of Ethics ...................................................19
Transfer and Administrative Services .............................19
Distribution of Fund Shares .........................................19
Service and Distribution Fees ....................................19
Further Information About American Century ..........................20
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE
Benham Intermediate-Term Limited-Term
Bond Bond Bond
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases ................................. none none none
Maximum Sales Load Imposed on Reinvested Dividends ...................... none none none
Deferred Sales Load ..................................................... none none none
Redemption Fee .......................................................... none none none
Exchange Fee ............................................................ none none none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees ......................................................... 0.55% 0.50% 0.45%
12b-1 Fees(1) ........................................................... 0.50% 0.50% 0.50%
Other Expenses(2) ....................................................... 0.00% 0.00% 0.00%
Total Fund Operating Expenses ........................................... 1.05% 1.00% 0.95%
EXAMPLE
You would pay the following expenses on a 1 year $11 $10 $10
$1,000 investment, assuming a 5% annual return and 3 years 33 32 30
redemption at the end of each time period: 5 years 58 55 52
10 years 128 122 116
(1) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the manager, and a portion is used to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page 19.
(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01 of 1% of average
net assets for the most recent fiscal year.
</TABLE>
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the American Century
funds offered by this Prospectus. The example set forth above assumes
reinvestment of all dividends and distributions and uses a 5% annual rate of
return as required by Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Advisor Class shares. The funds
offer two other classes of shares, one of which is primarily made available to
retail investors and one that is primarily made available to institutional
investors. The other classes have different fee structures than the Advisor
Class. The difference in the fee structures among the classes is the result of
their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. Accordingly, the core investment advisory expenses
do not vary by class. A difference in fees will result in different performance
for those classes. For additional information about the various classes, see
"Further Information About American Century," page 20.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
LIMITED-TERM BOND
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the fund for the time periods presented, the fund's
performance information would be lower as a result of the additional expense.
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .................................. $9.96 $9.68 $10.00
------- ------- -------
Income from Investment Operations
Net Investment Income .............................................. .56 .56 .31
Net Realized and Unrealized Gain (Loss) on
Investment Transactions ............................................ (.03) .28 (.32)
------- ------- -------
Total from Investment Operations ................................... .53 .84 (.01)
------- ------- -------
Distributions
From Net Investment Income ......................................... (.56) (.557) (.312)
------- ------- -------
Net Asset Value, End of Period ........................................ $9.93 $9.96 $9.68
======= ======= =======
TOTAL RETURN(2) .................................................... 5.48% 8.89% (.08%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets .................. .68% .69% .70%(3)
Ratio of Net Investment Income to Average Net Assets ............... 5.63% 5.70% 4.79%(3)
Portfolio Turnover Rate ............................................ 121% 116% 48%
Net Assets, End of Period (in thousands) ........................... $8,092 $7,193 $4,375
(1) March 1, 1994 (inception) through October 31, 1994.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
INTERMEDIATE-TERM BOND
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the fund for the time periods presented, the fund's
performance information would be lower as a result of the additional expense.
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ................................... $10.07 $9.53 $10.00
------- ------- -------
Income from Investment Operations
Net Investment Income ............................................... .58 .59 .34
Net Realized and Unrealized Gain (Loss) on
Investment Transactions ............................................. (.06) .54 (.47)
------- ------- -------
Total from Investment Operations .................................... .52 1.13 (.13)
------- ------- -------
Distributions
From Net Investment Income .......................................... (.58) (.587) (.337)
From Net Realized Gains on Investment Transactions .................. (.10) -- --
------- ------- -------
Total Distributions ................................................. (.68) (.587) (.337)
------- ------- -------
Net Asset Value, End of Period ......................................... $9.91 $10.07 $9.53
======= ======= =======
TOTAL RETURN(2) ..................................................... 5.36% 12.19% (1.24%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets ................... .74% .74% .75%(3)
Ratio of Net Investment Income to Average Net Assets ................ 5.90% 6.05% 5.23%(3)
Portfolio Turnover Rate ............................................. 87% 133% 48%
Net Assets, End of Period (in thousands) ............................ $15,626 $12,827 $4,262
(1) March 1, 1994 (inception) through October 31, 1994.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
</TABLE>
6 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
BENHAM BOND(1)
The Advisor Class of the fund was established September 3, 1996, however no
shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.25% lower than the Advisor Class. Had the Advisor
Class been in existence for the fund for the time periods presented, the fund's
performance information would be lower as a result of the additional expense.
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended October 31, except as noted.
1996 1995 1994 1993(1) 1992(1) 1991(1) 1990(1) 1989(1) 1988(1) 1987(1)(2)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $9.78 $8.91 $10.21 $9.92 $9.56 $8.90 $9.54 $9.18 $8.96 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations
Net Investment Income ................ .60 .61 .58 .66 .63 .75 .80 .82 .84 .48
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... (.14) .87 (1.12) 1.88 .35 .66 (.64) .36 .23 (1.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations ..... .46 1.48 (.54) 2.54 .98 1.41 .16 1.18 1.07 (.57)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions
From Net Investment Income ........... (.60) (.611) (.576) (.662) (.622) (.746) (.796) (.819) (.836) (.475)
From Net Realized Gain on
Investment Transactions .............. (.01) -- (.186) (1.587) -- -- (.006) -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions .................. (.61) (.611) (.762) (2.249) (.622) (.746) (.802) (.819) (.836) (.475)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period .......... $9.63 $9.78 $8.91 $10.21 $9.92 $9.56 $8.90 $9.54 $9.19 $8.96
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN(3) ...................... 4.91% 17.16% (5.47%) 11.81% 10.40% 16.44% 1.93% 13.51% 12.31% (8.63%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ .79% .78% .88% 1.00% .98%(4) .96(4) 1.00% 1.00% 1.00% 1.00%(5)
Ratio of Net Investment Income
to Average Net Assets ................ 6.18% 6.53% 6.07% 6.54% 6.30% 8.06% 8.81% 8.83% 9.15% 8.10%(5)
Portfolio Turnover Rate .............. 100% 105% 78% 113% 186% 219% 98% 216% 280% 146%(5)
Net Assets, End of
Period (in thousands) ................$142,567 $149,223 $121,012 $172,120 $154,031 $114,342 $77,270 $62,302 $25,788 $9,403
(1) The data presented has been restated to give effect to a 10 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.
(2) March 2, 1987 (inception) through October 31, 1987.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Expenses are shown net of management fees waived by the manager for
low-balance account fees collected during period.
(5) Annualized.
</TABLE>
Prospectus Financial Highlights 7
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
For an explanation of the securities ratings referred to in the following
discussion, see "An Explanation of Fixed Income Securities Ratings" in the
Statement of Additional Information.
LIMITED-TERM BOND, INTERMEDIATE-TERM BOND AND BENHAM BOND
These funds seek to provide investors with income through investments in
bonds and other debt instruments.
The three funds differ in the weighted average maturities of their
portfolios and accordingly in their degree of risk and level of income.
Generally, the longer the weighted average maturity, the higher the yield and
the greater the price volatility.
Limited-Term Bond will invest primarily in investment grade corporate
securities and other debt instruments and will maintain, under normal market
conditions, a weighted average maturity of five years or less. The fund is
designed for investors seeking a competitive level of current income with
limited price volatility.
Intermediate-Term Bond will invest primarily in investment grade corporate
securities and other debt instruments and will maintain, under normal market
conditions, a weighted average maturity of three to 10 years. The fund is
designed for investors seeking a higher level of current income than is
generally available from shorter-term corporate and government securities and
who are willing to accept a greater degree of price fluctuation.
Benham Bond will invest primarily in investment grade corporate bonds and
other debt instruments and until March 1, 1997, will maintain, under normal
market conditions, a weighted average portfolio maturity of 10 years or greater.
Effective March 1, 1997, the fund's policy regarding portfolio weighted average
maturity will change. As of that date, there will be no weighted average
portfolio maturity requirement, although it is expected that the fund will
probably invest in intermediate and long-term bonds. You should consider this
impending policy change prior to making an investment in the fund. The fund is
designed for investors whose primary goal is a level of current income higher
than is generally provided by money market or short- and intermediate-term
securities and who can accept the generally greater price volatility associated
with longer-term bonds.
The value of the shares of all three of these funds will vary from day to
day. See "Fundamentals of Fixed Income Investing," page 10.
Under normal market conditions, each fund will maintain at least 65% of the
value of its total assets in investment grade bonds and other debt instruments.
Under normal market conditions, each of the funds may invest up to 35% of its
assets, and for temporary defensive purposes, up to 100% of its assets, in
short-term money market instruments.
The manager will actively manage the portfolios, adjusting the weighted
average portfolio maturities as necessary in response to expected changes in
interest rates. During periods of rising interest rates, the weighted average
maturity of a fund may be moved to the shorter end of its maturity range in
order to reduce the effect of bond price declines on the fund's net asset value.
When interest rates are falling and bond prices are rising, the weighted average
portfolio maturity may be moved toward the longer end of its maturity range.
To achieve their objectives, the funds may invest in diversified
portfolios of high- and medium-grade debt
8 Information Regarding the Funds American Century Investments
securities payable in United States currency. The funds may invest in securities
which at the time of purchase are rated by a nationally recognized statistical
rating organization or, if not rated, are of equivalent investment quality as
determined by the manager, as follows: short-term notes within the two highest
categories, e.g., at least MIG-2 by Moody's Investor Services ("Moody's") or
SP-2 by Standard and Poor's Corporation ("S&P"); corporate, sovereign
government, and municipal bonds within the four highest categories (for example,
at least Baa by Moody's or BBB by S&P); securities of the United States
government and its agencies and instrumentalities (described below); other types
of securities rated at least P-2 by Moody's or A-2 by S&P. According to Moody's,
bonds rated Baa are medium-grade and possess some speculative characteristics. A
BBB rating by S&P indicates S&Ps belief that a security exhibits a satisfactory
degree of safety and capacity for repayment, but is more vulnerable to adverse
economic conditions or changing circumstances.
The government securities in which the funds may invest include: (1) direct
obligations of the United States, such as Treasury bills, notes and bonds, which
are supported by the full faith and credit of the United States, and (2)
obligations (including mortgage-related securities) issued or guaranteed by
agencies and instrumentalities of the United States government that are
established under an act of Congress. The securities of some of these agencies
and instrumentalities, such as the Government National Mortgage Association, are
guaranteed as to principal and interest by the U.S. Treasury, and other
securities are supported by the right of the issuer, such as the Federal Home
Loan Banks, to borrow from the Treasury. Other obligations, including those
issued by the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
Mortgage-related securities in which the funds may invest include
collateralized mortgage obligations ("CMOs") issued by a United States agency or
instrumentality. A CMO is a debt security that is collateralized by a portfolio
or pool of mortgages or mortgage-backed securities. The issuer's obligation to
make interest and principal payments is secured by the underlying pool or
portfolio of mortgages or securities.
The market value of mortgage-related securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of principal
and interest by the United States government, is not insured. When interest
rates rise, the market value of those securities may decrease in the same manner
as other debt, but when interest rates decline, their market value may not
increase as much as other debt instruments because of the prepayment feature
inherent in the underlying mortgages. If such securities are purchased at a
premium, the fund will suffer a loss if the obligation is prepaid. Prepayments
will be reinvested at prevailing rates, which may be less than the rate paid by
the prepaid obligation.
For the purpose of determining the weighted average portfolio maturity of
the funds, the manager shall consider the maturity of a mortgage-related
security to be the remaining expected average life of the security. The average
life of such securities is likely to be substantially less than the original
maturity as a result of prepayments of principal on the underlying mortgages,
especially in a declining interest rate environment. In determining the
remaining expected average life, the manager makes assumptions regarding
prepayments on underlying mortgages. In a rising interest rate environment,
those prepayments generally decrease, and may decrease below the rate of
prepayment assumed by the manager when purchasing those securities. Such
slowdown may cause the remaining maturity of those securities to lengthen, which
will increase the relative volatility of those securities and, hence, the fund
holding the securities. See "Fundamentals of Fixed Income Investing," page 10.
As noted, each fund may invest up to 35% of its assets, and for temporary
defensive purposes as determined by the manager, up to 100% of its assets in
short-term money market instruments.
Those instruments may include:
(1) Securities issued or guaranteed by the U.S. government and its
agencies and instrumentalities;
(2) Commercial Paper;
(3) Certificates of Deposit and Euro Dollar Certificates of Deposit;
(4) Bankers' Acceptances;
(5) Short-term notes, bonds, debentures, or other debt instruments; and
(6) Repurchase agreements.
Prospectus Information Regarding the Funds 9
These investments must meet the rating standards for the funds. To the
extent a fund assumes a defensive position, the weighted average maturity of its
portfolio may not fall within the ranges stated for the fund.
[line graph data]
FUNDAMENTALS OF FIXED INCOME INVESTING
HISTORICAL YIELDS
30-YEAR 20-YEAR 3-MONTH
TREASURY TAX-EXEMPT TREASURY
BOND BONDS BILLS
1/92 8% 6% 4%
2/92 8% 6% 4%
3/92 8% 6% 4%
4/92 8% 6% 4%
5/92 8% 6% 4%
6/92 8% 6% 4%
7/92 7% 6% 3%
8/92 7% 6% 3%
9/92 7% 6% 3%
10/92 8% 6% 3%
11/92 8% 6% 3%
12/92 7% 6% 3%
1/93 7% 6% 3%
2/93 7% 5% 3%
3/93 7% 6% 3%
4/93 7% 6% 3%
5/93 7% 6% 3%
6/93 7% 5% 3%
7/93 7% 5% 3%
8/93 6% 5% 3%
9/93 6% 5% 3%
10/93 6% 5% 3%
11/93 6% 5% 3%
12/93 6% 5% 3%
1/94 6% 5% 3%
2/94 7% 5% 3%
3/94 7% 6% 4%
4/94 7% 6% 4%
5/94 7% 6% 4%
6/94 8% 6% 4%
7/94 7% 6% 4%
8/94 7% 6% 5%
9/94 8% 6% 5%
10/94 8% 6% 5%
11/94 8% 7% 6%
12/94 8% 6% 6%
1/95 8% 6% 6%
2/95 7% 6% 6%
3/95 7% 6% 6%
4/95 7% 6% 6%
5/95 7% 6% 6%
6/95 7% 6% 6%
7/95 7% 6% 6%
8/95 7% 6% 5%
9/95 7% 6% 5%
10/95 6% 5% 6%
11/95 6% 5% 5%
12/95 6% 5% 5%
1/96 6% 5% 5%
2/96 6% 5% 5%
3/96 7% 6% 5%
4/96 7% 6% 5%
5/96 7% 6% 5%
6/96 7% 6% 5%
7/96 7% 6% 5%
8/96 7% 6% 5%
9/96 7% 6% 5%
10/96 7% 6% 5%
11/96 6% 6% 5%
12/96 7% 6% 5%
BOND PRICE VOLATILITY
For a given change in interest rates, longer maturity bonds experience a
greater change in price, as shown below:
Price of a 7% Price of same
coupon bond bond if its Percent
Years to now trading yield increases change
Maturity to yield 7% to 8% in price
- ------------------------------------------------------------------------
1 year $100.00 $99.06 -0.94%
3 years 100.00 97.38 -2.62%
10 years 100.00 93.20 -6.80%
30 years 100.00 88.69 -11.31%
YEARS TO MATURITY
[bar graph - graph data]
LIMITED-TERM BOND
Likely Maturities of Individual Holdings 0-8 years
Expected Weighted Average Portfolio Maturity Range 6 mos.-5 years
INTERMEDIATE-TERM BOND
Likely Maturities of Individual Holdings 0-20 years
Expected Weighted Average Portfolio Maturity Range 3-20 years
BENHAM BOND
Likely Maturities of Individual Holdings 0-30 years
Expected Weighted Average Portfolio Maturity Range 10-20 years
Over time, the level of interest rates available in the marketplace
changes. As prevailing rates fall, the prices of bonds and other securities that
trade on a yield basis rise. On the other hand, when prevailing interest rates
rise, bond prices fall.
Generally, the longer the maturity of a debt security, the higher its yield
and the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds, to change. If sustained
over time, it would also have the impact of raising or lowering the yield of the
fund.
In addition to the risk arising from fluctuating interest rate levels, debt
securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond ratings
take into account the relative likelihood that such timely payment will occur.
As a result, lower-rated bonds tend to sell at higher yield levels than
top-rated bonds of similar maturity.
AUTHORIZED QUALITY RANGES
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
Limited-Term Bond x x x x
Intermediate-Term
Bond x x x x
Benham Bond x x x x
In addition, as economic, political and business developments unfold,
lower-quality bonds, which possess lower levels of protection with regard to
timely payment, usually exhibit more price fluctuation than do higher-quality
bonds of like maturity.
The investment practices of our fixed income funds take into account these
relationships. The maturity and asset quality of each fund have implications for
the degree of price volatility and the yield level to be expected from each.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the financial
information on pages 5, 6 and 7 of this Prospectus.
10 Information Regarding the Funds American Century Investments
With respect to each series of shares, investment decisions to purchase and
sell securities are based on the anticipated contribution of the security in
question to the particular fund's objectives. The manager believes that the rate
of portfolio turnover is irrelevant when it determines a change is in order to
achieve those objectives and accordingly, the annual portfolio turnover rate
cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a fund since short-term capital gains are
taxable as ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise committed
to the purchase of securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the funds' Board of Directors.
Each of the funds may invest in repurchase agreements with respect to any
security in which that fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such fund. No fund will invest more than 15% of its assets in
repurchase agreements maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.
No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a bond whose interest rate is indexed to the return on two-year
treasury securities would be a permissible investment (assuming it otherwise
meets the other requirements for the funds), while a security whose underlying
value is linked to the price of oil would not be a permissible investment since
the funds may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.
Prospectus Information Regarding the Funds 11
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or
other financial asset will not move in the direction the portfolio
manager anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the
exchange, either of which may make it difficult or impossible to close
out a position when desired;
o the risk that adverse price movements in an instrument can result in a
loss substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including, if
applicable, the right to call the loan to enable the fund to vote the
securities. Such loans may not exceed one-third of the fund's net assets taken
at market. Interest on loaned securities may not exceed 10% of the annual gross
income of the fund (without offset for realized capital gains). The portfolio
lending policy described in this paragraph is a fundamental policy that may be
changed only by a vote of fund shareholders.
FOREIGN SECURITIES
Each of the funds may invest an unlimited amount of its assets in the
securities of foreign issuers, including foreign governments, when these
securities meet their standards of selection. Securities of foreign issuers may
trade in the U.S. or foreign securities markets. The funds will limit their
purchase of debt securities to U.S. dollar denominated investment grade
obligations. Such securities will be primarily from developed markets.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without the limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time the commitment to purchase is
made. Delivery of and payment for these securities typically occurs 15 to 45
days after the commitment to purchase. Market rates of interest on debt
securities at the time of delivery may be higher or lower than those contracted
for on the when-issued security. Accordingly, the value of each security may
decline prior to delivery, which could result in a loss to the fund. A separate
account for each fund consisting of cash or high-quality liquid debt securities
in an amount at least equal to the when-issued commitments will be established
and maintained with the custodian. No income will accrue to the fund prior to
delivery.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds' cri-
12 Information Regarding the Funds American Century Investments
teria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of Rule
144A securities to the manager. The board retains the responsibility to monitor
the implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A security
that is illiquid. In such an event, the funds' manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
INTEREST RATE FUTURES CONTRACTS AND
OPTIONS THEREON
The funds may buy and sell interest rate futures contracts relating to debt
securities ("debt futures," i.e., futures relating to debt securities, and "bond
index futures," i.e., futures relating to indexes on types or groups of bonds)
and write and buy put and call options relating to interest rate futures
contracts.
For options sold, a fund will segregate cash or high-quality debt
securities equal to the value of securities underlying the option unless the
option is otherwise covered.
A fund will deposit in a segregated account with its custodian bank
high-quality debt obligations in an amount equal to the fluctuating market value
of long futures contracts it has purchased, less any margin deposited on its
long position. It may hold cash or acquire such debt obligations for the purpose
of making these deposits.
A fund will purchase or sell futures contracts and options thereon only for
the purpose of hedging against changes in the market value of its portfolio
securities or changes in the market value of securities that it may wish to
include in its portfolio. A fund will enter into future and option transactions
only to the extent that the sum of the amount of margin deposits on its existing
futures positions and premiums paid for related options do not exceed 5% of its
assets.
Since futures contracts and options thereon can replicate movements in the
cash markets for the securities in which a fund invests without the large cash
investments required for dealing in such markets, they may subject a fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are (1) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (2) possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need for additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.
The manager will attempt to create a closely correlated hedge but hedging
activity may not be completely successful in eliminating market value
fluctuation. The ordinary spreads between prices in the cash and futures
markets, due to the differences in the natures of those markets, are subject to
distortion. Due to the possibility of distortion, a correct forecast of general
interest rate trends by the manager
Prospectus Information Regarding the Funds 13
may still not result in a successful transaction. The manager may be incorrect
in its expectations as to the extent of various interest rate movements or the
time span within which the movements take place.
See the Statement of Additional Information for further information about
these instruments and their risks.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, and yield.
Performance data may be quoted separately for the Advisor Class and for the
other classes offered by the funds.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. Yield is calculated by
adding over a 30-day (or one-month) period all interest and dividend income (net
of fund expenses) calculated on each day's market values, dividing this sum by
the average number of fund shares outstanding during the period, and expressing
the result as a percentage of the fund's share price on the last day of the
30-day (or one-month) period. The percentage is then annualized. Capital gains
and losses are not included in the calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on your shares or the income reported
in a fund's financial statements.
The funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or Donoghue's Money Fund Report) and publications
that monitor the performance of mutual funds. Performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
In addition, fund performance may be compared to well-known indices of market
performance including the Donoghue's Money Fund Average and the Bank Rate
Monitor National Index of 2 1/2-year CD rates. Fund performance may also be
compared, on a relative basis, to other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
14 Information Regarding the Funds American Century Investments
HOW TO INVEST
WITH AMERICAN CENTURY INVESTMENTS
The following section explains how to purchase, exchange and redeem Advisor
Class shares of the funds offered by this Prospectus.
HOW TO PURCHASE AND SELL AMERICAN
CENTURY FUNDS
One or more of the funds offered by this Prospectus is available as an
investment option under your employer-sponsored retirement or savings plan or
through or in connection with a program, product or service offered by a
financial intermediary, such as a bank, broker-dealer or an insurance company.
Since all records of your share ownership are maintained by your plan sponsor,
plan recordkeeper, or other financial intermediary, all orders to purchase,
exchange and redeem shares must be made through your employer or other financial
intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select American
Century funds as an investment option.
If you are purchasing through a financial intermediary, you should contact
your service representative at the financial intermediary for information about
an American Century fund.
If you have questions about a fund, see "Investment Policies of the Funds,"
page 8, or call one of our Institutional Service Representative at
1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See
"When Share Price is Determined," page 16.
We may discontinue offering shares generally in the funds (including any
class of shares of a fund) or in any particular state without notice to
shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY
FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the
shares of a fund for shares of another fund in our family. See your plan
administrator, employee benefits office or financial intermediary for details on
the rules in your plan governing exchanges.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell ("redeem") your shares through the plan or
financial intermediary at their net asset value. Your plan administrator,
trustee, or financial intermediary or other designated person must provide us
with redemption instructions. The shares will be redeemed at the net asset value
next computed after receipt of the instructions in good order. See "When Share
Price Is Determined," page 16. If you have any questions about how to redeem,
contact your plan administrator, employee benefits office, or service
representative at your financial intermediary, as applicable.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get
answers to any questions that you may have about the funds and the services we
offer, call one of our Institutional Service Representatives at 1-800-345-3533.
Prospectus How To Invest With American Century Investments 15
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except the funds issued by the
American Century Target Maturities Trust, net asset value is determined at the
close of regular trading on each day that the New York Stock Exchange is open,
usually 3 p.m. Central time. The net asset value for the Target Maturities funds
are determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or our agents before the time as of which the
net asset value of the fund is determined, are effective on, and will receive
the price determined, that day. Investment, redemption and exchange requests
received thereafter are effective on, and receive the price determined on, the
next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our account
if they are deposited before the time as of which the net asset value of the
fund is determined.
It is the responsibility of your plan recordkeeper or financial
intermediary to transmit your purchase, exchange and redemption requests to the
funds' transfer agent prior to the applicable cut-off time for receiving orders
and to make payment for any purchase transactions in accordance with the funds'
procedures or any contractual arrangements with the funds or the funds'
distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
16 Additional Information You Should Know American Century Investments
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds are published in
leading newspapers daily. Because the total expense ratio for the Advisor Class
shares is 0.25% higher than the Investor Class, their net asset values will be
lower than the Investor Class. The net asset values of the Advisor Class may be
obtained by calling us.
DISTRIBUTIONS
At the close of each day, including Saturdays, Sundays and holidays, net
income of the funds is determined and declared as a distribution. The
distribution will be paid monthly on the last Friday of each month, except for
year-end distributions, which will be paid on the last business day of the year.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 16. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but the funds may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code, in all events in a manner consistent with the provisions of the
Investment Company Act.
Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase made by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 59 1/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date.
TAXES
Each fund has elected to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders, it pays no income taxes.
TAX-DEFERRED ACCOUNTS
If Advisor Class shares are purchased through tax-deferred accounts, such
as a qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals from the plan.
TAXABLE ACCOUNTS
If Advisor Class shares are purchased through taxable accounts,
distributions of net investment income and net short-term capital gains are
taxable to you as ordinary income, except as described below. The dividends from
net income of the fixed income funds do not qualify for the 70%
dividends-received deduction for corporations since they are derived from
interest income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless of the length of time the shares on which
such distributions are paid have been held by the shareholder. However, you
should note that any loss realized upon the sale or redemption of shares held
for six months or less will be treated as a long-term capital loss to the extent
of any distribution of long-term capital gain to you with respect to such
shares.
Prospectus Additional Information You Should Know 17
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV from either us or your
financial intermediary notifying you of the status of your distributions for
federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, either we or your financial intermediary is required by
federal law to withhold and remit to the IRS 31% of reportable payments (which
may include dividends, capital gains distributions and redemptions). Those
regulations require you to certify that the Social Security number or tax
identification number you provide is correct and that you are not subject to 31%
withholding for previous under-reporting to the IRS. You will be asked to make
the appropriate certification on your application. Payments reported by us that
omit your Social Security number or tax identification number will subject us to
a penalty of $50, which will be charged against your account if you fail to
provide the certification by the time the report is filed, and is not
refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolio of the funds
and directs the purchase and sale of their investment securities. It utilizes
teams of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The teams meet regularly to review
portfolio holdings and to discuss purchase and sale activity. The teams adjust
holdings in the
18 Additional Information You Should Know American Century Investments
funds' portfolios and the funds' asset mix as they deem appropriate in pursuit
of the funds' investment objectives. Individual portfolio manager members of the
teams may also adjust portfolio holdings of the funds or of sectors of the funds
as necessary between team meetings.
The portfolio manager members of the teams managing the funds described in
this Prospectus and their work experience for the last five years are as
follows:
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio
Manager, joined American Century as Vice President and Portfolio Manager in
November 1989. In April 1993, he became Senior Vice President.
JEFFREY L. HOUSTON, Portfolio Manager, has worked for American Century
since November 1990.
The activities of the manager are subject only to directions of the funds'
Board of Directors. The manager pays all the expenses of the funds except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the Advisor Class of the funds, the manager
receives an annual fee at the following rates:
o 0.45% of the average net assets of Limited-Term Bond;
o 0.50% of the average net assets of Intermediate-Term Bond; and
o 0.55% of the average net assets of Benham Bond.
On the first business day of each month, each fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for such fund by
the aggregate average daily closing value of each fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides facilities, equipment and personnel to the funds and is paid for
such services by the manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager.
The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of
Directors, controls American Century Companies by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the manager. As agent for
the funds and the manager, the distributor enters into contracts with various
banks, broker-dealers, insurance companies and other financial intermediaries
with respect to the sale of the funds' shares and/or the use of the funds'
shares in various financial services. The manager (or an affiliate) pays all
expenses incurred in promoting sales of, and distributing, the Advisor Class and
in securing such services out of the Rule 12b-1 fees described in the section
that follows.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the Securities and Exchange Commission ("SEC") under
the Investment Company Act permits investment companies that adopt a writ-
Prospectus Additional Information You Should Know 19
ten plan to pay certain expenses associated with the distribution of their
shares. Pursuant to that rule, the funds' Board of Directors and the initial
shareholder of the funds' Advisor Class shares have approved and adopted a
Master Distribution and Shareholder Services Plan (the "Plan"). Pursuant to the
Plan, each fund pays the manager a shareholder services fee and a distribution
fee, each equal to 0.25% (for a total of 0.50%) per annum of the average daily
net assets of the shares of the fund's Advisor Class. The shareholder services
fee is paid for the purpose of paying the costs of securing certain shareholder
and administrative services, and the distribution fee is paid for the purpose of
paying the costs of providing various distribution services. All or a portion of
such fees are paid by the manager to the banks, broker-dealers, insurance
companies or other financial intermediaries through which such shares are made
available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Master Distribution and
Shareholder Services Plan" in the Statement of Additional Information. Fees paid
pursuant to the Plan may be paid for shareholder services and the maintenance of
accounts and therefore may constitute "service fees" for purposes of applicable
rules of the National Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., issuer of the funds, was organized as
a Maryland corporation on July 2, 1990. The corporation commenced operations on
February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a
Delaware corporation which had been in business since October 1958. Pursuant to
the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland
corporation was the surviving entity and continued the business of the Delaware
corporation with the same officers and directors, the same shareholders and the
same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main
Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-3533
(international calls: 816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value
shares. Each series is commonly referred to as a fund. The assets belonging to
each series of shares are held separately by the custodian.
American Century offers three classes of each of the funds offered by this
Prospectus: an Investor Class, a Service Class, and the Advisor Class. The
shares offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The
Service Class is primarily offered to institutional investors or through
institutional distribution channels, such as employer-sponsored retirement plans
or through banks, broker-dealers, insurance companies or other financial
intermediaries. The other classes have different fees, expenses, and/or minimum
investment requirements than the Advisor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
Different fees and expenses will affect performance. For additional information
concerning the Investor Class of shares, call one of our Investor Services
Representatives at 1-800-345-2021. For information concerning the Service Class
of shares, call one of our Institutional Service Representatives at
1-800-345-3533 or contact a sales representative or financial intermediary who
offers that class of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, and (d) each class
may have different exchange privileges.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value
20 Additional Information You Should Know American Century Investments
applicable to such share on all questions, except for those matters which must
be voted on separately by the series or class of shares affected. Matters
affecting only one series or class are voted upon only by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the funds to hold a
special meeting of shareholders. The manager will assist in the communication
with other shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 21
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9702 [recycled logo]
SH-BKT-7776 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MARCH 1, 1997
Twentieth
Century(R)
Group
Select
Heritage
Growth
Ultra
Vista
INSTITUTIONAL CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your investment needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.
American Century Investments
Benham Group(R) American Century Group Twentieth Century Group
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Select o Heritage o Growth
Ultra o Vista
PROSPECTUS
MARCH 1, 1997
Select o Heritage o Growth
Ultra o Vista
INSTITUTIONAL CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century Investments, a
family of funds that includes nearly 70 no-load mutual funds covering a variety
of investment opportunities. Five of the funds from our Twentieth Century Group
that invest primarily in equity securities are described in this Prospectus.
Their investment objectives are listed on page 2 of this Prospectus. The other
funds are described in separate prospectuses.
Each fund's shares offered in this Prospectus (the Institutional Class shares)
are sold at their net asset value with no sales charges or commissions.
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
endowments, foundations and financial advisors that meet the funds' minimum
investment requirements. Institutional Class shares are not available for
purchase by insurance companies or participant-directed employer-sponsored
retirement plans.
This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVES OF THE FUNDS
AMERICAN CENTURY - TWENTIETH CENTURY SELECT FUND
AMERICAN CENTURY - TWENTIETH CENTURY HERITAGE FUND
The Select and Heritage funds seek capital growth. The funds intend to pursue
their investment objectives by investing primarily in common stocks of companies
that are considered by management to have better-than-average prospects for
appreciation. As a matter of fundamental policy, 80% of the assets of Select and
Heritage must be invested in securities of companies that have a record of
paying dividends or have committed themselves to the payment of regular
dividends, or otherwise produce income.
AMERICAN CENTURY - TWENTIETH CENTURY GROWTH FUND
AMERICAN CENTURY - TWENTIETH CENTURY ULTRA FUND
AMERICAN CENTURY - TWENTIETH CENTURY VISTA FUND
The Growth, Ultra and Vista funds seek capital growth. The funds intend to
pursue their investment objectives by investing primarily in common stocks that
are considered by management to have better-than-average prospects for
appreciation.
There is no assurance that the funds will achieve their respective investment
objectives.
NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objectives American Century Investments
TABLE OF CONTENTS
Investment Objectives of the Funds...........................2
Transaction and Operating Expense Table......................4
Performance Information of Other Class.......................5
INFORMATION REGARDING THE FUNDS
Investment Policies of the Funds............................10
Growth Equity Funds......................................10
Select and Heritage .....................................10
Growth, Ultra and Vista .................................10
Other Investment Practices, Their Characteristics
and Risks................................................11
Foreign Securities.......................................11
Forward Currency Exchange Contracts......................11
Portfolio Turnover.......................................12
Repurchase Agreements....................................12
Derivative Securities....................................13
Portfolio Lending........................................13
When-Issued Securities...................................14
Rule 144A Securities.....................................14
Short Sales..............................................14
Performance Advertising.....................................14
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments................................16
Investing in American Century...............................16
How to Open an Account......................................16
By Mail................................................16
By Wire................................................16
By Exchange............................................16
In Person..............................................16
Subsequent Investments...................................17
By Mail................................................17
By Telephone...........................................17
By Wire................................................17
In Person..............................................17
Automatic Investment Plan................................17
Minimum Investment..........................................17
How to Exchange from One Account to Another ................17
By Mail ...............................................18
By Telephone...........................................18
How to Redeem Shares........................................18
By Mail................................................18
By Telephone...........................................18
By Check-A-Month.......................................18
Other Automatic Redemptions............................18
Redemption Proceeds......................................18
By Check...............................................18
By Wire and ACH........................................18
Special Requirements for Large Redemptions...............18
Signature Guarantee.........................................19
Special Shareholder Services................................19
Open Order Service.....................................19
Tax-Qualified Retirement Plans.........................19
Important Policies Regarding Your Investments...............20
Reports to Shareholders.....................................20
Customers of Banks, Broker-Dealers and
Other Financial Intermediaries...........................21
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price.................................................22
When Share Price Is Determined...........................22
How Share Price Is Determined............................22
Where to Find Information About Share Price..............23
Distributions...............................................23
Taxes.......................................................23
Tax-Deferred Accounts....................................23
Taxable Accounts.........................................23
Management..................................................25
Investment Management....................................25
Code of Ethics...........................................26
Transfer and Administrative Services.....................26
Distribution of Fund Shares.................................26
Further Information About American Century..................26
Prospectus Table of Contents 3
<TABLE>
TRANSACTION AND OPERATING EXPENSE TABLE
Select, Heritage,
Growth, Ultra, Vista
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C>
Maximum Sales Load Imposed on Purchases.............................................none
Maximum Sales Load Imposed on Reinvested Dividends..................................none
Deferred Sales Load.................................................................none
Redemption Fee......................................................................none
Exchange Fee........................................................................none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees....................................................................0.80%
12b-1 Fees..........................................................................none
Other Expenses(1)..................................................................0.00%
Total Fund Operating Expenses......................................................0.80%
EXAMPLE
You would pay the following expenses on a 1 year $ 8
$1,000 investment, assuming a 5% annual return and 3 years 26
redemption at the end of each time period: 5 years 44
10 years 99
(1) Other expenses, which includes the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as defined in
the Investment Company Act, were less than 0.01 of 1% of average net assets for
the most recent fiscal year.
</TABLE>
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the funds offered by
this Prospectus. The example set forth above assumes reinvestment of all
dividends and distributions and uses a 5% annual rate of return as required by
Securities and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Institutional Class shares. The funds
offer three other classes of shares, one of which is primarily made available to
retail investors and two that are primarily made available to institutional
investors. The other classes have different fee structures than the
Institutional Class. The difference in the fee structures among the classes is
the result of their separate arrangements for shareholder and distribution
services and not the result of any difference in amounts charged by the manager
for core investment advisory services. Accordingly, the core investment advisory
expenses do not vary by class. A difference in fees will result in different
performance for those classes. For additional information about the various
classes, see "Further Information About American Century," page 27.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
SELECT
The Institutional Class of the fund was established September 3, 1996, however,
no shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expenses.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ......................... $39.52 $37.67 $45.76 $39.18 $40.79 $34.19 $35.98 $27.85 $32.69 $35.40
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income .................. .20(1) .33(1) .40 .46 .53 .63 .62 1.10 .64 .33
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ...... 6.73 4.68 (3.59) 7.94 .34 8.17 (1.29) 7.74 1.37 .80
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total From
Investment Operations .................. 6.93 5.01 (3.19) 8.40 .87 8.80 (.67) 8.84 2.01 1.13
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............. (.27) (.281) (.432) (.495) (.653) (.652) (1.116) (.707) (.481) (.380)
From Net Realized Gains on
Investment Transactions ................ (4.66) (2.750) (4.466) (1.313) (1.823) (1.551) -- -- (6.367) (3.462)
In Excess of Net Realized Gains ........ -- (.125) -- (.016) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions .................... (4.93) (3.156) (4.898) (1.824) (2.476) (2.203) (1.116) (.707) (6.848) (3.842)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year .............. $41.52 $39.52 $37.67 $45.76 $39.18 $40.79 $34.19 $35.98 $27.85 $32.69
======= ====== ====== ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ........................ 19.76% 15.02% (7.37)% 22.20% 1.76% 27.05% (2.03)% 32.59% 7.31% 3.47%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
to Average Net Assets .................. .5% .9% 1.0% 1.1% 1.4% 1.7% 1.8% 3.4% 2.2% 1.1%
Portfolio Turnover Rate ................ 105% 106% 126% 82% 95% 84% 83% 93% 140% 123%
Average Commission Paid per
Investment Security Traded ............. $.041 $.046 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) .................. $4,039 $4,008 $4,278 $5,160 $4,534 $4,163 $2,953 $2,721 $2,367 $2,417
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 5
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
HERITAGE
The Institutional Class of the fund was established September 3, 1996, however,
no shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expenses.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31, except as noted.
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ...................... $11.75 $10.32 $11.03 $9.30 $8.59 $6.55 $8.15 $6.21 $5.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income ................. --(2) .05(2) .07 .07 .10 .11 .10 .08 .06
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 1.15 1.96 (.21) 2.43 .72 2.04 (.94) 1.93 1.16
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 1.15 2.01 (.14) 2.50 .82 2.15 (.84) 2.01 1.22
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ (.05) (.033) (.068) (.093) (.113) (.110) (.065) (.066) (.013)
From Net Realized Gains on
Investment Transactions ............... (.61) (.514) (.500) (.679) -- -- (.691) -- --
In Excess of Net Realized Gains ....... -- (.030) (.006) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (.66) (.577) (.574) (.772) (.113) (.110) (.756) (.066) (.013)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ........... $12.24 $11.75 $10.32 $11.03 $9.30 $8.59 $6.55 $8.15 $6.21
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3) ....................... 10.44% 21.04% (1.13)% 28.64% 9.65% 33.25% (11.62)% 32.65% 25.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. .99% .99% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net Investment Income
to Average Net Assets ................. -- .5% .7% .7% 1.1% 1.5% 1.6% 1.3% 1.4%(4)
Portfolio Turnover Rate ............... 122% 121% 136% 116% 119% 146% 127% 159% 130%(4)
Average Commission Paid per
Investment Security Traded ............ $.042 $.042 --(5) --(5) --(5) --(5) --(5) --(5) --(5)
Net Assets, End
of Period (in millions) ............... $1,083 $1,008 $897 $702 $369 $269 $199 $117 $55
(1) November 10, 1987 (inception) through October 31, 1988
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total return for periods less than one year are not
annualized.
(4) Annualized.
(5) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
6 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
GROWTH
The Institutional Class of the fund was established September 3, 1996, however,
no shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expenses.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ....................... $23.88 $22.99 $25.27 $23.64 $22.32 $14.81 $17.44 $12.54 $15.62 $19.47
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) ......... (.01)(1) .08(1) .06 .06 (.02) .04 .09 .08 .30 .01
Net Realized and Unrealized Gain
(Loss) on Investment Transactions .... 1.47 4.08 .48 1.94 1.35 8.47 (2.05) 5.14 .13 1.30
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ..... 1.46 4.16 .54 2.00 1.33 8.51 (1.96) 5.22 .43 1.31
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ........... (.07) (.051) (.056) -- (.013) (.111) (.079) (.320) (.046) (.086)
From Net Realized Gains
on Investment Transactions ........... (2.98) (3.183) (2.764) (.353) -- (.891) (.592) -- (3.460) (5.076)
In Excess of Net Realized Gains ...... (.08) (.040) (.002) (.013) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions .................. (3.13) (3.274) (2.822) (.366) (.013) (1.002) (.671) (.320) (3.506) (5.162)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............ $22.21 $23.88 $22.99 $25.27 $23.64 $22.32 $14.81 $17.44 $12.54 $15.62
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ...................... 8.18% 22.31% 2.66% 8.48% 5.96% 60.64% (11.72)% 42.74% 3.18% 9.32%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets ......... (.1)% .4% .3% .2% (.1)% .2% .6% .5% 2.4% .2%
Portfolio Turnover Rate .............. 122% 141% 100% 94% 53% 69% 118% 98% 143% 114%
Average Commission Paid per
Investment Security Traded ........... $.0360 $.040 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................ $4,765 $5,130 $4,363 $4,641 $4,472 $3,193 $1,697 $1,597 $1,229 $1,188
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 7
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
ULTRA
The Institutional Class of the fund was established September 3, 1996, however,
no shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expenses.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of Year ........................ $28.03 $21.16 $21.61 $15.46 $15.53 $7.73 $9.63 $6.86 $8.76 $9.06
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) ......... (.05)(1) (.07)(1) (.03) (.09) (.05) (.03) (.03) .19 (.02) (.07)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 2.84 7.58 (.42) 6.24 (.02) 7.86 (.73) 2.58 1.38 (.22)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 2.79 7.51 (.45) 6.15 (.07) 7.83 (.76) 2.77 1.36 (.29)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ -- -- -- -- -- -- (.196) -- -- (.007)
From Net Realized Gains on
Investment Transactions ............... (1.19) (.645) -- -- -- (.028) (.947) -- (3.258) --
In Excess of Net Realized Gains ....... (.11) -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (1.30) (.645) -- -- -- (.028) (1.143) -- (3.258) (.007)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $29.52 $28.03 $21.16 $21.61 $15.46 $15.53 $7.73 $9.63 $6.86 $8.76
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 10.79% 36.89% (2.08)% 39.78% (.45)% 101.51% (9.02)% 40.37% 19.52% (3.23)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.2)% (.3)% (.1)% (.6)% (.4)% (.5)% (.3)% 2.2% (.3)% (.5)%
Portfolio Turnover Rate ............... 87% 87% 78% 53% 59% 42% 141% 132% 140% 137%
Average Commission Paid per
Investment Security Traded ............ $.0350 $.033 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $18,266 $14,376 $10,344 $8,037 $4,275 $2,148 $330 $347 $258 $236
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
8 Financial Highlights American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
VISTA
The Institutional Class of the fund was established September 3, 1996, however,
no shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expenses.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ........................ $15.73 $10.94 $12.24 $11.01 $10.53 $6.28 $8.74 $5.91 $5.73 $6.88
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income (Loss) .......... (.11)(1) (.08)(1) (.08) (.07) (.04) (.02) (.01) (.03) .01 (.05)
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ..... 1.09 4.90 .45 1.95 .52 4.27 (1.76) 2.87 .63 (.45)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... .98 4.82 .37 1.88 .48 4.25 (1.77) 2.84 .64 (.50)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income ............ -- -- -- -- -- -- -- (.012) -- --
From Net Realized Gains
on Investment Transactions ............ (1.02) (.030) (1.663) (.641) -- -- (.693) -- (.462) (.651)
In Excess of Net Realized Gains ....... (.01) -- (.012) (.006) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (1.03) (.030) (1.675) (.647) -- -- (.693) (.012) (.462) (.651)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ............. $15.68 $15.73 $10.94 $12.24 $11.01 $10.53 $6.28 $8.74 $5.91 $5.73
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(2) ....................... 6.96% 44.20% 4.16% 17.71% 4.55% 67.67% (22.17)% 48.19% 11.41% (7.70)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................. .99% .98% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets .......... (.7)% (.6)% (.8)% (.6)% (.4)% (.3)% (.1)% (.4)% .2% (.7)%
Portfolio Turnover Rate ............... 91% 89% 111% 133% 87% 92% 103% 125% 145% 123%
Average Commission Paid per
Investment Security Traded ............ $.028 $.033 --(3) --(3) --(3) --(3) --(3) --(3) --(3) --(3)
Net Assets, End
of Year (in millions) ................. $2,276 $1,676 $792 $847 $830 $622 $341 $264 $206 $187
(1) Computed using average shares outstanding throughout the period.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 9
INFORMATION REGARDING THE FUNDS
INVESTMENT POLICIES OF THE FUNDS
The funds have adopted certain investment restrictions that are set forth in the
Statement of Additional Information. Those restrictions, as well as the
investment objectives of the funds identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The funds have implemented additional investment policies
and practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.
GROWTH EQUITY FUNDS
All of the funds offered by this Prospectus seek capital growth by investing in
securities, primarily common stocks, that meet certain fundamental and technical
standards of selection (relating primarily to earnings and revenues
acceleration) and have, in the opinion of the funds' manager,
better-than-average potential for appreciation. So long as a sufficient number
of such securities are available, the manager intends to keep the funds fully
invested in these securities regardless of the movement of stock prices
generally. In most circumstances, the funds' actual level of cash and cash
equivalents will fluctuate between 0% and 10% of total assets with 90% to 100%
of its assets committed to equity and equity equivalent investments. The funds
may purchase securities only of companies that have a record of at least three
years of continuous operation.
SELECT AND HERITAGE
Securities of companies chosen for the Select and Heritage funds are chosen
primarily for their growth potential. Additionally, as a matter of fundamental
policy, 80% of the assets of Select and Heritage must be invested in securities
of companies that have a record of paying dividends, or have committed
themselves to the payment of regular dividends, or otherwise produce income. The
remaining 20% of fund assets may be invested in any otherwise permissible
securities that the manager believes will contribute to the funds' stated
investment objectives. The income payments of equity securities are only a
secondary consideration; therefore, the income return that Select and Heritage
provide may not be significant. Otherwise, Select and Heritage follow the same
investment techniques described below for Growth, Ultra and Vista.
Since Select is one of our larger funds and Heritage is substantially smaller,
Select will invest in shares of larger companies with larger share trading
volume, and Heritage will tend to invest in smaller companies with smaller share
trading volume. However, the two funds are not mutually exclusive, and a given
security may be owned by both funds. For the reasons stated in the next section,
it should be expected that Heritage will be more volatile and subject to greater
short-term risk and long-term opportunity than Select.
Because of its size, and because it invests primarily in securities that pay
dividends or are committed to the payment of dividends, Select may be expected
to be the least volatile of the funds described in this Prospectus.
GROWTH, ULTRA AND VISTA
Management selects for the portfolios of the Growth, Ultra and Vista funds,
securities of companies whose earnings and revenue trends meet management's
standards of selection.
Growth generally invests in large, established companies. Ultra generally
invests in medium to large size companies, while Vista invests in medium-sized
and smaller companies. As of February 1, 1997, the size of the companies (as
reflected by their capitalizations) held by the funds was as follows:
10 Information Regarding the Funds American Century Investments
Median Capitalization
of Companies Held
- ------------------------------------------------------------------
Growth $11,638,755,000
Ultra $10,795,469,000
Vista $ 1,069,608,000
- ------------------------------------------------------------------
The median capitalization of the companies in a given fund may change over time.
In addition, the criteria outlined previously are not mutually exclusive, and a
given security may be owned by more than one of the funds.
The size of companies in which a fund invests tends to give each fund its own
characteristics of volatility and risk. These differences come about because
developments such as new or improved products or methods, which would be
relatively insignificant to a large company, may have a substantial impact on
the earnings and revenues of a small company and create a greater demand and a
higher value for its shares. However, a new product failure, which could readily
be absorbed by a large company, can cause a rapid decline in the value of the
shares of a smaller company. Hence, it could be expected that funds investing in
smaller companies would be more volatile than funds investing in larger
companies.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
Each of the funds may invest an unlimited amount of its assets in the securities
of foreign issuers, primarily from developed markets, when these securities meet
its standards of selection. The funds may make such investments either directly
in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign
securities. DRs are securities listed on exchanges or quoted in the
over-the-counter market in one country but represent the shares of issuers
domiciled in other countries. DRs may be sponsored or unsponsored. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
Subject to their individual investment objectives and policies, the funds may
invest in common stocks, convertible securities, preferred stocks, bonds, notes
and other debt securities of foreign issuers, and debt securities of foreign
governments and their agencies. The funds will limit their purchase of debt
securities to investment grade obligations.
Investments in foreign securities may present certain risks, including those
resulting from fluctuations in currency exchange rates, future political and
economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the funds may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars,
but have a value that is dependent on the performance of a foreign security, as
valued in the currency of its home country. As a result, the value of a fund's
portfolio may be affected by changes in the exchange rates between foreign
currencies and the U.S. dollar, as well as by changes in the market values of
the securities themselves. The performance of foreign currencies relative to the
U.S. dollar may be a factor in the overall performance of a fund.
To protect against adverse movements in exchange rates between currencies, the
funds may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
A fund may elect to enter into a forward currency exchange contract with respect
to a specific purchase or sale of a security, or with respect to the fund's
portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, a
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice
Prospectus Information Regarding the Funds 11
is sometimes referred to as "transaction hedging." Each fund may enter into
transaction hedging contracts with respect to all or a substantial portion of
its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, a fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." A fund may not enter into a
portfolio hedging transaction where it would be obligated to deliver an amount
of foreign currency in excess of the aggregate value of its portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
Each fund will make use of portfolio hedging to the extent deemed appropriate by
the manager. However, it is anticipated that a fund will enter into portfolio
hedges much less frequently than transaction hedges.
If a fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of a fund's
assets will be committed to a segregated account in connection with portfolio
hedging transactions.
Predicting the relative future values of currencies is very difficult, and there
is no assurance that any attempt to protect a fund against adverse currency
movements through the use of forward currency exchange contracts will be
successful. In addition, the use of forward currency exchange contracts tends to
limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the financial information
on pages 5-9 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a fund's objectives. The
manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and, accordingly,
the annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of each fund may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost that the funds pay directly.
Portfolio turnover may also affect the character of capital gains, if any,
realized and distributed by a fund since short-term capital gains are taxable as
ordinary income.
REPURCHASE AGREEMENTS
Each fund may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of that fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase obligation,
a repurchase agreement can be considered a loan collateralized by the security
purchased. The fund's risk is the ability of the seller to pay the agreed-upon
repurchase price on the repurchase date. If the seller defaults, the fund may
incur costs in disposing of the collateral, which would reduce the amount
realized thereon. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the value
of the security decreases, the fund could experience a loss.
The funds will limit repurchase agreement transactions to securities issued by
the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities
12 Information Regarding the Funds American Century Investments
dealers who are deemed creditworthy pursuant to criteria adopted by the funds'
Board of Directors.
No fund will invest more than 15% of its assets in repurchase agreements
maturing in more than seven days.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, each of the
funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators ("reference indices").
Some "derivatives" such as mortgage-related and other asset-backed securities
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices, or currency exchange rates and for cash management purposes as a
low-cost method of gaining exposure to a particular securities market without
investing directly in those securities.
No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment since the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the Board will
review the manager's policy for investments in derivative securities annually.
PORTFOLIO LENDING
In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market. Interest on
loaned securities may not exceed 10% of the annual gross income of the fund
(without offset for realized capital gains). The portfolio lending policy
described in this paragraph is
Prospectus Information Regarding the Funds 13
a fundamental policy that may be changed only by a vote of a majority of fund
shareholders.
WHEN-ISSUED SECURITIES
Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the manager, such
purchases will further the investment objectives of the fund. The price of
when-issued securities is established at the time the commitment to purchase is
made. Delivery of and payment for these securities typically occur 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
when-issued security. Accordingly, the value of such security may decline prior
to delivery, which could result in a loss to the fund. A separate account for
each fund consisting of cash or high-quality liquid debt securities in an amount
at least equal to the when-issued commitments will be established and maintained
with the custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission has taken the position that the liquidity of
such securities in the portfolio of a fund offering redeemable securities is a
question of fact for the Board of Directors to determine, such determination to
be based upon a consideration of the readily available trading markets and the
review of any contractual restrictions. The staff also acknowledges that, while
the board retains ultimate responsibility, it may delegate this function to the
manager. Accordingly, the board has established guidelines and procedures for
determining the liquidity of Rule 144A securities and has delegated the
day-to-day function of determining the liquidity of Rule 144A securities to the
manager. The board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain qualified
institutional investors, the liquidity of such securities may be limited
accordingly and a fund may, from time to time, hold a Rule 144A security that is
illiquid. In such an event, the funds' manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. No fund may invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
SHORT SALES
Each fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow a fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns at a
current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund performance
may be shown by presenting one or more performance measurements, including
cumulative total return or average annual total return, and yield. Performance
data may be quoted separately for the Institutional Class and for the other
classes offered by the funds.
Cumulative total return data is computed by considering all elements of return,
including reinvestment of dividends and capital gains distributions, over a
stated period of time. Average annual total return is determined by computing
the annual compound return over a stated period of time that would have produced
the fund's cumulative total return over
14 Information Regarding the Funds American Century Investments
the same period if the fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period expressed as
a percentage of the fund's share price.
Yields are calculated according to accounting methods that are standardized in
accordance with SEC rules for all stock and bond funds. Because yield accounting
methods differ from the methods used for other accounting purposes, a fund's
yield may not equal the income paid on its shares or the income reported in the
fund's financial statements.
The funds may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
All performance information advertised by the funds is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Funds 15
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-3533 for a brochure or prospectuses for the other funds in the
American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest with American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through a bank,
broker-dealer or other financial intermediary, the following sections, as well
as the information contained in our Investor Services Guide, may not apply to
you. Please read "Minimum Investment," page 17 and "Customers of Banks,
Broker-Dealers and Other Financial Intermediaries," page 21.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing your
taxpayer identification number. (You must also certify whether you are subject
to withholding for failing to report income to the IRS.) Investments received
without a certified taxpayer identification number will be returned.
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S. dollars
to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or mail
a completed application and provide your bank with the following information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number
o If more than one account, account numbers and amount to be invested in
each account.
o Current tax year, previous tax year or rollover designation if
an IRA. Specify whether IRA, SEP-IRA or SARSEP-IRA.
BY EXCHANGE
Call 1-800-345-3533 from 7 a.m. to 7 p.m. Central time to get information on
opening an account by exchanging from another American Century account. See
page 17 for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of our
Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
16 How to Invest with American Century Investments American Century Investments
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or government
direct deposit (see "Automatic Investment Plan," this page) or by any of the
methods below. The minimum investment requirement for subsequent investments:
$250 for checks submitted without the remittance portion of a previous statement
or confirmation, $50 for all other types of subsequent investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account. You may call an Institutional Service Representative or use our
Automated Information Line.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 16 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors Centers.
The locations of our three Investors Centers are listed on page 16.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Institutional Service Representatives.
MINIMUM INVESTMENT
The minimum investment is $5 million ($3 million for endowments and
foundations). If you invest with us through a bank, broker-dealer or other
financial intermediary, the minimum investment requirement may be met by
aggregating the investments of various clients of your financial intermediary.
The minimum investment requirement may be waived if you or your financial
intermediary, if applicable, has an aggregate investment in our family of funds
of $10 million or more ($5 million for endowments and foundations). If your
balance or the balance of your financial intermediary, if applicable, falls
below the minimum investment requirements due to redemptions or exchanges, we
reserve the right to convert your shares to Investor Class shares of the same
fund. The Investor Class shares have a unified management fee that is 0.20%
higher than the Institutional Class shares.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange your
fund shares to our other funds up to six times per year per account. An exchange
request will be processed as of the same day it is received, if it is received
before the funds' net asset values are calculated, which is one hour prior to
the close of the New York Stock Exchange for funds issued by the American
Century Target Maturities Trust, and at the close of the Exchange for all of our
other funds. See "When Share Price is Determined," page 22.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
If, in any 90-day period, the total of your exchanges and your redemptions from
any one account exceeds the lesser of $250,000 or 1% of the fund's assets,
further exchanges will be subject to special requirements to comply with our
policy on large redemptions. See "Special Requirements for Large Redemptions,"
page 18.
Prospectus How to Invest with American Century Investments 17
BY MAIL
You may direct us in writing to exchange your shares from one American Century
account to another. For additional information, please see our Investor Services
Guide.
BY TELEPHONE
You can make exchanges over the telephone if you have authorized us to accept
telephone instructions. You can authorize this by selecting "Full Services" on
your application or by calling one of our Institutional Service Representatives
at 1-800-345-3533 to get the appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be made
at the next net asset value determined after a complete redemption request is
received. For large redemptions, please read "Special Requirements for Large
Redemptions," this page.
Please note that a request to redeem shares in an IRA or 403(b) plan must be
accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a redemption
form, which we will send you upon request, or by a letter to us. Certain
redemptions may require a signature guarantee. Please see "Signature Guarantee,"
page 19.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem your
shares by calling an Institutional Service Representative.
BY CHECK-A-MONTH
You may redeem shares by Check-A-Month. A Check-A-Month plan automatically
redeems enough shares each month to provide you with a check in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.
OTHER AUTOMATIC REDEMPTIONS
You may elect to make redemptions automatically by authorizing us to send funds
to you or to your account at a bank or other financial institution. To set up
automatic redemptions, call one of our Institutional Service Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered owner
of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Once the funds are transmitted, the time of receipt and the funds' availability
are not under our control.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule 18f-1 under the Investment Company Act,
which obligates each fund make certain redemptions in cash. This requirement to
pay redemptions in cash applies to situations where one shareholder redeems,
during any 90-day period, up to the lesser of $250,000 or 1% of the assets of
the fund. Although redemptions in excess of this limitation will also normally
be paid in cash, we reserve the right under unusual circumstances to honor these
redemptions by making payment in whole or in part in readily marketable
securities (a "redemption-in-kind").
If payment is made in securities, the securities will be selected by the fund,
will be valued in the same manner as they are in computing the fund's net asset
value and will be provided without prior notice.
18 How to Invest with American Century Investments American Century Investments
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
Despite the funds' right to redeem fund shares through a redemption-in-kind, we
do not expect to exercise this option unless a fund has an unusually low level
of cash to meet redemptions and/or is experiencing unusually strong demands for
its cash. Such a demand might be caused, for example, by extreme market
conditions that result in an abnormally high level of redemption requests
concentrated in a short period of time. Absent these or similar circumstances,
we expect redemptions in excess of $250,000 to be paid in cash in any fund with
assets of more than $50 million if total redemptions from any one account in any
90-day period do not exceed one-half of 1% of the total assets of the fund.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a signature
guarantee. Which transactions will require a signature guarantee will depend on
which service options you elect when you open your account. For example, if you
choose "In Writing Only," a signature guarantee would be required when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit union,
broker-dealer, securities exchange or association, clearing agency or savings
association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if you
live outside the United States and would like to know how to obtain a signature
guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction, or to
change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage. These
are listed on the account application. Please make note of these options and
elect the ones that are appropriate for you. Be aware that the "Full Services"
option offers you the most flexibility. You will find more information about
each of these service options in our Investor Services Guide.
Our special shareholder services include:
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy shares
of a variable-priced fund by exchange from one of our money market funds, or a
price at which to sell shares of a variable-priced fund by exchange to one of
our money market funds. The designated purchase price must be equal to or lower,
or the designated sale price equal to or higher, than the variable-priced fund's
net asset value at the time the order is placed. If the designated price is met
within 90 calendar days, we will execute your exchange order automatically at
that price (or better). Open orders not executed within 90 days will be
canceled.
If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are accepted
only by telephone or in person. These transactions are subject to exchange
limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
Each fund is available for your tax-deferred retirement plan. Call or write us
and request the appropriate forms for:
o Individual Retirement Accounts (IRAs);
o 403(b)plans for employees of public school systems and non-profit
organizations; or
Prospectus How to Invest with American Century Investments 19
o Profit sharing plans and pension plans for corporations and other
employers.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment. Please
refer to the Investor Services Guide for further information about the policies
discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated statement
that summarizes all of your American Century holdings, as well as an individual
statement for each fund you own that reflects all year-to-date activity in your
account. You may request a statement of your account activity at any time.
With the exception of most automatic transactions, each time you invest, redeem,
transfer or exchange shares, we will send you a confirmation of the transaction.
See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your statements
and confirmations to ensure that your instructions were acted on properly.
20 How to Invest with American Century Investments American Century Investments
Please notify us immediately in writing if there is an error. If you fail to
provide notification of an error with reasonable promptness, i.e., within 30
days of non-automatic transactions or within 30 days of the date of your
consolidated quarterly statement, in the case of automatic transactions, we will
deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you may use
in completing your U.S. income tax return. See the Investor Services Guide for
more information.
Each year, we will send you an annual and a semiannual report relating to your
fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully as
they will help you understand your fund.
CUSTOMERS OF BANKS, BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
Information contained in our Investor Services Guide pertains to shareholders
who invest directly with American Century rather than through a bank,
broker-dealer or other financial intermediary.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, or other financial intermediary, your ability to purchase,
exchange and redeem shares will depend on your agreement with, and the policies
of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your financial intermediary.
Prospectus How to Invest with American Century Investments 19
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net asset
value is determined by calculating the total value of a fund's assets, deducting
total liabilities and dividing the result by the number of shares outstanding.
For all American Century funds, except funds issued by the American Century
Target Maturities Trust, net asset value is determined at the close of regular
trading on each day that the New York Stock Exchange is open, usually 3 p.m.
Central time. The net asset values for Target Maturities funds are determined
one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or our agents before the time as of which the net asset
value is determined, are effective on, and will receive the price determined,
that day. Investment, redemption and exchange requests received thereafter are
effective on, and receive the price determined on, the next day the Exchange is
open.
Investments are considered received only when payment is received by us. Wired
funds are considered received the day they are deposited in our bank account if
they are deposited before the time as of which the net asset value is
determined.
Investments by telephone pursuant to your prior authorization to us to draw on
your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day by
mail prior to the time as of which the net asset value is determined, will
receive that day's price. Investments and instructions received after that time
will receive the price determined on the next business day.
If you invest in fund shares through a bank, financial advisor or other
financial intermediary, it is the responsibility of your financial intermediary
to transmit your purchase, exchange and redemption requests to the funds'
transfer agent prior to the applicable cut-off time for receiving orders and to
make payment for any purchase transactions in accordance with the funds'
procedures or any contractual arrangements with the funds or the funds'
distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of each fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a
22 Additional Information You Should Know American Century Investments
security was established but before the net asset value per share was determined
that was likely to materially change the net asset value, then that security
would be valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock Exchange
is not open and on which a fund's net asset value is not calculated. Therefore,
such calculation does not take place contemporaneously with the determination of
the prices of many of the portfolio securities used in such calculation and the
value of a fund's portfolio may be affected on days when shares of the fund may
not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the funds are published in leading
newspapers daily. The net asset value of the Institutional Class of each fund
may be obtained by calling us.
DISTRIBUTIONS
In general, distributions from net investment income and net realized securities
gains, if any, are declared and paid once a year, but the funds may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act. Distributions from investment
income and from net profits realized on the sale of securities, if any, will be
declared annually on or before December 31.
THE OBJECTIVE OF THESE FUNDS IS CAPITAL APPRECIATION AND NOT THE PRODUCTION OF
DISTRIBUTIONS. YOU SHOULD MEASURE THE SUCCESS OF YOUR INVESTMENT BY THE VALUE OF
YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE DISTRIBUTIONS YOU RECEIVE.
For shareholders investing through taxable accounts, distributions will be
reinvested unless you elect to receive them in cash. Distributions of less than
$10 generally will be reinvested. Distributions made shortly after a purchase by
check or ACH may be held up to 15 days. You may elect to have distributions on
shares held in Individual Retirement Accounts and 403(b) plans paid in cash only
if you are at least 591/2 years old or permanently and totally disabled.
Distribution checks normally are mailed within seven days after the record date.
Please consult our Investor Services Guide for further information regarding
your distribution options.
A distribution on shares of a fund does not increase the value of your shares or
your total return. At any given time the value of your shares includes the
undistributed net gains, if any, realized by the fund on the sale of portfolio
securities, and undistributed dividends and interest received, less fund
expenses.
Because such gains and dividends are included in the value of your shares prior
to distribution, when they are distributed the value of your shares is reduced
by the amount of the distribution. If you buy your shares through a taxable
account just before the distribution, you will pay the full price for your
shares, and then receive a portion of the purchase price back as a taxable
distribution. See "Taxes," this page.
TAXES
Each fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a qualified
employer-sponsored retirement or savings plan (excluding participant-directed
employer-sponsored retirement plans, which are ineligible to invest in
Institutional Class shares), income and capital gains distributions paid by the
funds will generally not be subject to current taxation, but will accumulate in
your account on a tax-deferred basis.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless of the length of time you have held the
shares on which such distributions are paid. However, you should note that any
loss realized upon the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of
Prospectus Additional Information You Should Know 23
any distribution of long-term capital gain to you with respect to such shares.
Dividends and interest received by a fund on foreign securities may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Foreign countries generally do not impose taxes on capital gains in
respect of investments by non-resident investors. The foreign taxes paid by a
fund will reduce its dividends.
If more than 50% of the value of a fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by you.
If a fund purchases the securities of certain foreign investment funds or trusts
called passive foreign investment companies, capital gains on the sale of such
holdings will be deemed to be ordinary income regardless of how long the fund
holds its investment. The fund may also be subject to corporate income tax and
an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains. See "Distributions," page 23.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue Code,
we or your financial intermediary is required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends,
capital gains distributions and redemptions). Those regulations require you to
certify that the Social Security number or tax identification number you provide
is correct and that you are not subject to 31% withholding for previous
under-reporting to the IRS. You will be asked to make the appropriate
certification on your application. Payments reported by us that omit your Social
Security number or tax identification number will subject us to a penalty of
$50, which will be charged against your account if you fail to provide the
certification by the time the report is filed, and is not refundable.
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
24 Additional Information You Should Know American Century Investments
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the funds. Acting pursuant to an
investment management agreement entered into with the funds, American Century
Investment Management, Inc. serves as the investment manager of the funds. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The manager has been providing investment advisory
services to investment companies and institutional clients since it was founded
in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolios of the funds and
directs the purchase and sale of their investment securities. It utilizes teams
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the funds. The teams meet regularly to review portfolio
holdings and to discuss purchase and sale activity. The teams adjust holdings in
the funds' portfolios as they deem appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the team may also
adjust portfolio holdings of the funds as necessary between team meetings.
The portfolio manager members of the teams managing the funds described in this
Prospectus and their work experience for the last five years are as follows:
JAMES E. STOWERS III, President and Portfolio Manager, joined American Century
in 1981. He is a member of the teams that manage Growth and Ultra.
CHARLES M. DUBOC, Senior Vice President and Portfolio Manager, joined American
Century in August 1985, and served as Fixed Income Portfolio Manager from that
time until April 1993. In April 1993, Mr. Duboc joined American Century's equity
investment efforts. He is a member of the team that manages Select.
GLENN A. FOGLE, Vice President and Portfolio Manager, joined American Century in
September 1990 as an Investment Analyst, a position he held until March 1993. At
that time he was promoted to Portfolio Manager. He is a member of the team that
manages Vista.
NANCY B. PRIAL, Vice President and Portfolio Manager, joined American Century in
February 1994 as a Portfolio Manager. For more than four years prior to joining
American Century, Ms. Prial served as Senior Vice President and Portfolio
Manager at Frontier Capital Management Company, Boston, Massachusetts. She is a
member of the team that manages Heritage.
KEVIN M. LEWIS, Portfolio Manager, joined American Century in October 1995.
Prior to that he served as a Portfolio Manager for Virtus Capital Management,
Richmond, Virginia, from January 1995 to October 1995. Prior to that, he was a
Portfolio Manager for Signet Trust Company, Richmond, Virginia. Mr. Lewis is a
member of the team that manages Heritage.
JOHN D. SEITZER, Portfolio Manager, joined American Century in June 1993 as an
Investment Analyst, a position he held until July 1996. At that time he was
promoted to Portfolio Manager. Prior to joining American Century, Mr. Seitzer
attended Indiana University from August 1991 to June 1993, where he obtained his
MBA degree. Mr. Seitzer is a member of the team that manages Vista.
BRUCE A. WIMBERLY, Portfolio Manager, joined American Century in September 1994
as an Investment Analyst, a position he held until July 1996. At that time he
was promoted to Portfolio Manager. Prior to joining American Century, Mr.
Wimberly attended Kellogg Graduate School of Management, Northwestern University
from August 1992 to August 1994, where he obtained his MBA degree. Prior to that
he served as a Research Analyst for Frontier Capital Management Company, Boston,
Massachusetts. Mr. Wimberly is a member of the team that manages Ultra.
JEAN LEDFORD, Vice President and Portfolio Manager, joined American Century in
January 1997 as a Portfolio Manager. Prior to joining American
Prospectus Additional Information You Should Know 25
Century, Ms. Ledford worked for the State of Wisconsin Investment Board as an
Investment Director from 1994 to 1996 and as an Assistance Investment Director
from 1983 to 1994. Ms. Ledford is a member of the team that manages Select.
The activities of the manager are subject only to directions of the funds' Board
of Directors. The manager pays all the expenses of the funds except brokerage,
taxes, interest, fees and expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the Institutional Class of the funds, the manager
receives an annual fee of 0.80% of the average net assets of each of the funds.
On the first business day of each month, each series of shares pays a management
fee to the manager for the previous month at the rate specified. The fee for the
previous month is calculated by multiplying the applicable fee for such series
by the aggregate average daily closing value of the series' net assets during
the previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The funds and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend-paying agent for the funds. It
provides facilities, equipment and personnel to the funds, and is paid for such
services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs.
Although there is no sales charge levied by the funds, transactions in shares of
the funds may be executed by brokers or investment advisors who charge a
transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the funds or the
manager. You should be aware of the fact that these transactions may be made
directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The funds' shares are distributed by American Century Investment Services, Inc.,
broker-dealer and an affiliate of the manager. The manager pays all expenses for
promoting sales of, and distributing the fund shares offered by this Prospectus.
The Institutional Class of shares does not pay any commissions or other fees to
the distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., the issuer of the funds, was organized as
a Maryland corpora-
26 Additional Information You Should Know American Century Investments
tion on July 2, 1990. The corporation commenced operations on February 28, 1991,
the date it merged with Twentieth Century Investors, Inc., a Delaware
corporation which had been in business since October 1958. Pursuant to the terms
of the Agreement and Plan of Merger dated July 27, 1990, the Maryland
corporation was the surviving entity and continued the business of the Delaware
corporation with the same officers and directors, the same shareholders and the
same investment objectives, policies and restrictions.
The principal office of the funds is American Century Tower, 4500 Main Street,
P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by
mail to that address, or by telephone to 1-800-345-3533 (international calls:
816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value shares.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
American Century offers four classes of each of the funds offered by this
Prospectus: an Investor Class, an Institutional Class, a Service Class, and the
Advisor Class. The shares offered by this Prospectus are Institutional Class
shares and have no up-front charges, commissions, or 12b-1 fees.
The Investor Class is primarily made available to retail investors. The Service
Class and Advisor Class are primarily offered to institutional investors or
through institutional distribution channels, such as employer-sponsored
retirement plans or through banks, broker-dealers, insurance companies or other
financial intermediaries. The other classes have different fees, expenses,
and/or minimum investment requirements than the Institutional Class. The
difference in the fee structures among the classes is the result of their
separate arrangements for shareholder and distribution services and not the
result of any difference in amounts charged by the manager for core investment
advisory services. Accordingly, the core investment advisory expenses do not
vary by class. Different fees and expenses will affect performance. For
additional information concerning the Investor Class of shares, call one of our
Investor Services Representatives at 1-800-345-2021. For information concerning
the Service or Advisor classes of shares not offered by this Prospectus, call
one of our Institutional Service Representatives at 1-800-345-3533 or contact a
sales representative or financial intermediary who offers those classes of
shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
Each share, irrespective of series or class, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except for
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for the
funds to hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' by laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request a fund to hold a special
meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 27
NOTES
28 Notes
NOTES
Notes 29
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9702 [recycled logo]
SH-BKT-7806 Recycled
<PAGE>
PROSPECTUS
[american century company logo]
American
Century (sm)
MARCH 1, 1997
AMERICAN
CENTURY
GROUP
Balanced
INSTITUTIONAL CLASS
[front cover]
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering stocks,
bonds, money markets, specialty investments and blended portfolios. To help you
find the funds that may meet your investment needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.
AMERICAN CENTURY INVESTMENTS
Benham Group(R) American Century Group Twentieth Century(R) Group
MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
Balanced
PROSPECTUS
MARCH 1, 1997
BALANCED
INSTITUTIONAL CLASS
AMERICAN CENTURY MUTUAL FUNDS, INC.
American Century Mutual Funds, Inc. is a part of American Century Investments, a
family of funds that includes nearly 70 no-load mutual funds covering a variety
of investment opportunities. One of the funds that seeks capital growth and
current income is described in this Prospectus. Its investment objective is
listed on page 2 of this Prospectus. The other funds are described in separate
prospectuses.
The fund's shares offered in this Prospectus (the Institutional Class) are sold
at their net asset value with no sales charges or commissions.
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
endowments, foundations and financial advisors that meet the fund's minimum
investment requirement. Institutional Class shares are not available for
purchase by insurance companies or participant-directed employer-sponsored
retirement plans.
This Prospectus gives you information about the fund that you should know before
investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated March 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
American Century Investments
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0700
Internet: www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY BALANCED FUND
The Balanced fund seeks capital growth and current income. It is management's
intention to maintain approximately 60% of the fund's assets in common stocks
that are considered by management to have better-than-average prospects for
appreciation and the remainder in bonds and other fixed income securities.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund....................2
Transaction and Operating Expense Table.............4
Performance Information of Other Class..............5
INFORMATION REGARDING THE FUND
Investment Policies of the Fund.....................6
Investment Approach..............................6
Equity Investments...............................6
Fixed Income Investments.........................6
Other Investment Practices, Their Characteristics
and Risks........................................7
Foreign Securities...............................7
Forward Currency Exchange Contracts..............7
Portfolio Turnover...............................8
Repurchase Agreements............................8
Derivative Securities............................9
Portfolio Lending................................9
When-Issued Securities...........................9
Rule 144A Securities............................10
Short Sales.....................................10
Performance Advertising............................10
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments.......................12
Investing in American Century......................12
How to Open an Account.............................12
By Mail.......................................12
By Wire.......................................12
By Exchange...................................12
In Person.....................................12
Subsequent Investments..........................13
By Mail.......................................13
By Telephone..................................13
By Wire.......................................13
In Person.....................................13
Automatic Investment Plan.......................13
Minimum Investment.................................13
How to Exchange from One Account to Another .......13
By Mail ......................................14
By Telephone..................................14
How to Redeem Shares...............................14
By Mail ......................................14
By Telephone..................................14
By Check-A-Month..............................14
Other Automatic Redemptions...................14
Redemption Proceeds.............................14
By Check......................................14
By Wire and ACH...............................14
Special Requirements for Large Redemptions......14
Signature Guarantee................................15
Special Shareholder Services.......................15
Open Order Service............................15
Tax-Qualified Retirement Plans................16
Important Policies Regarding Your Investments......16
Reports to Shareholders............................16
Customers of Banks, Broker-Dealers
and Other Financial Intermediaries..............17
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price........................................18
When Share Price Is Determined..................18
How Share Price Is Determined...................18
Where to Find Information About Share Price.....19
Distributions......................................19
Taxes..............................................19
Tax-Deferred Accounts...........................19
Taxable Accounts................................19
Management.........................................21
Investment Management...........................21
Code of Ethics..................................21
Transfer and Administrative Services............22
Distribution of Fund Shares........................22
Further Information About American Century.........22
Prospectus Table of Contents 3
TRANSACTION AND OPERATING EXPENSE TABLE
Balanced
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases....................... none
Maximum Sales Load Imposed on Reinvested Dividends............ none
Deferred Sales Load........................................... none
Redemption Fee................................................ none
Exchange Fee.................................................. none
ANNUAL FUND OPERATING EXPENSES (as a percentage of net assets):
Management Fees............................................... 0.80%
12b-1 Fees.................................................... none
Other Expenses(1)............................................. 0.00%
Total Fund Operating Expenses................................. 0.80%
EXAMPLE:
You would pay the following expenses on a 1 year $ 8
$1,000 investment, assuming a 5% annual return and 3 years 26
redemption at the end of each time period: 5 years 44
10 years 99
(1) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were less than 0.01% of 1% of
average net assets for the most recent fiscal year.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of Balanced offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by Securities
and Exchange Commission regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE CONSIDERED
INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS AND EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Institutional Class shares. The fund
offers three other classes of shares, one of which is primarily made available
to retail investors and two that are primarily made available to institutional
investors. The other classes have different fee structures than the
Institutional Class. The difference in the fee structures among the classes is
the result of their separate arrangements for shareholder and distribution
services and not the result of any difference in amounts charged by the manager
for core investment advisory services. Accordingly, the core investment advisory
expenses do not vary by class. A difference in fees will result in different
performance for those classes. For additional information about the various
classes, see "Further Information About American Century," page 22.
4 Transaction and Operating Expense Table American Century Investments
<TABLE>
<CAPTION>
PERFORMANCE INFORMATION OF OTHER CLASS
BALANCED
The Institutional Class of the fund was established September 3, 1996, however
no shares had been issued prior to the fund's fiscal year end. The financial
information in this table regarding selected per share data for the fund
reflects the performance of the fund's Investor Class of shares, which has a
total expense ratio that is 0.20% higher than the Institutional Class. Had the
Institutional Class been in existence for the fund for the time periods
presented, the fund's performance information would be higher as a result of the
lower expenses.
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended October 31, except as noted.
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.....$17.70 $15.94 $16.52 $14.89 $15.11 $10.89 $11.84 $10.13 $10.22
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income..................44(2) .48(2) .42 .38 .33 .38 .41 .37 .01
Net Realized and Unrealized Gain (Loss)
on Investment Transactions......... 1.88 2.03 (.58) 1.62 (.23) 4.22 (.62) 1.71 (.10)
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations...... 2.32 2.51 (.16) 2.00 .10 4.60 (.21) 2.08 (.09)
------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From Net Investment Income............ (.46) (.475) (.416) (.375) (.322) (.384) (.417) (.372) --
From Net Realized Gains
on Investment Transactions.........(1.01) (.274) -- -- -- -- (.320) -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions...................(1.47) (.749) (.416) (.375) (.322) (.384) (.737) (.372) --
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period...........$18.55 $17.70 $15.94 $16.52 $14.89 $15.11 $10.89 $11.84 $10.13
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(3).......................14.04% 16.36% (.93)% 13.64% .63% 42.92% (2.10)% 20.94% (.88)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets................. .99% .98% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net Investment
Income to Average Net Assets....... 2.5% 2.9% 2.7% 2.4% 2.4% 3.1% 3.8% 4.2% 4.4%(4)
Portfolio Turnover Rate............... 130% 85% 94% 95% 100% 116% 104% 171% 99%(4)
Average Commission Paid per
Investment Security Traded......... $.040 $.039 --(5) --(5) --(5) --(5) --(5) --(5) --(5)
Net Assets, End of Period
(in millions) $879 $816 $704 $706 $654 $255 $66 $30 $3
(1) October 20, 1988 (inception) through October 31, 1988.
(2) Computed using average shares outstanding throughout the period.
(3) Total returns for periods less than one year are not annualized. Total
return assumes reinvestment of dividends and capital gains distributions,
if any.
(4) Annualized.
(5) Disclosure of average commission paid per share was not required prior to
the year ended October 31, 1995.
</TABLE>
Prospectus Financial Highlights 5
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in the
Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
INVESTMENT APPROACH
The manager intends to invest approximately 60% of the fund's assets in equity
securities, while the remainder will be invested in bonds and other fixed income
securities. A description of the investment style for each class of investment
follows.
EQUITY INVESTMENTS
With the equity portion of the Balanced portfolio, the manager seeks capital
growth by investing in securities, primarily common stocks, that meet certain
fundamental and technical standards of selection (relating primarily to earnings
and revenues acceleration) and have, in the opinion of the manager,
better-than-average potential for appreciation. So long as a sufficient number
of such securities are available, the manager intends to keep the equity portion
of Balanced fully invested in these securities regardless of the movement of
stock prices generally. The fund may purchase securities only of companies that
have a record of at least three years continuous operation.
The manager selects, for the equity portion of the portfolio, securities of
companies whose earnings and revenue trends meet management's standards of
selection. The size of the companies in which a fund invests tends to give it
its own characteristics of volatility and risk. These differences come about
because developments such as new or improved products or methods, which would be
relatively insignificant to a large company, may have a substantial impact on
the earnings and revenues of a small company and create a greater demand and a
higher value for its shares. However, a new product failure which could readily
be absorbed by a large company can cause a rapid decline in the value of the
shares of a smaller company. Hence, it could be expected that the volatility of
the fund will be impacted by the size of companies in which it invests.
FIXED INCOME INVESTMENTS
The manager intends to maintain approximately 40% of the fund's assets in fixed
income securities with a minimum of 25% of that amount in fixed income senior
securities. The fixed income securities in the fund will be chosen based on
their level of income production and price stability. The fund may invest in a
diversified portfolio of debt and other fixed-rate securities payable in United
States currency. These may include obligations of the U.S. government, its
agencies and instrumentalities; corporate securities (bonds, notes, preferreds
and convertible issues), and sovereign government, municipal, mortgage-backed
and other asset-backed securities.
There are no maturity restrictions on the fixed income securities in which the
fund invests. Under normal market conditions the weighted average portfolio
maturity for the fixed income portfolio will be in the three- to 10-year range.
The manager will actively manage the portfolio, adjusting the weighted average
portfolio maturity in response to expected changes in interest rates. During
periods of rising interest rates, a shorter weighted average maturity may be
adopted in order to reduce the effect of bond price declines on the fund's net
asset value. When interest rates are falling and bond prices rising, a longer
weighted average portfolio maturity may be adopted.
It is the manager's intention to invest the fund's fixed income holdings in
high-grade securities. At least 80% of fixed income assets will be invested in
securities which at the time of purchase are rated
6 Information Regarding the Fund American Century Investments
within the three highest categories by a nationally recognized statistical
rating organization [at least A by Moody's Investors Service, Inc. (Moody's) or
Standard & Poor's Corp. (S&P)].
The remaining portion of the fixed income assets may be invested in issues in
the fourth highest category (Baa by Moody's or BBB by S&P), or, if not rated,
are of equivalent investment quality as determined by the manager and which, in
the opinion of the manager, can contribute meaningfully to the fund's results
without compromising its objectives. Such issues might include a lower-rated
issue where research suggests the likelihood of a rating increase; or a
convertible issue of a company deemed attractive by the equity management team.
According to Moody's, bonds rated Baa are medium-grade and possess some
speculative characteristics. A BBB rating by S&P indicates S&P's belief that a
security exhibits a satisfactory degree of safety and capacity for repayment,
but is more vulnerable to adverse economic conditions or changing circumstances.
See "An Explanation of Fixed Income Securities Ratings" in the Statement of
Additional Information.
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Additional Investment Restrictions" in the
Statement of Additional Information.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities of
foreign issuers, primarily from developed markets, when these securities meet
its standards of selection. The fund may make such investments either directly
in foreign securities, or by purchasing Depositary Receipts ("DRs") for foreign
securities. DRs are securities listed on exchanges or quoted in the
over-the-counter market in one country but represent the shares of issuers
domiciled in other countries. DRs may be sponsored or unsponsored. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
The fund may invest in common stocks, convertible securities, preferred stocks,
bonds, notes and other debt securities of foreign issuers, and debt securities
of foreign governments and their agencies. The fund will limit its purchase of
debt securities to investment-grade obligations.
Investments in foreign securities may present certain risks, including those
resulting from fluctuations in currency exchange rates, future political and
economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY EXCHANGE CONTRACTS
Some of the foreign securities held by the fund may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars,
but have a value that is dependent on the performance of a foreign security, as
valued in the currency of its home country. As a result, the value of the fund's
portfolio may be affected by changes in the exchange rates between foreign
currencies and the U.S. dollar, as well as by changes in the market values of
the securities themselves. The performance of foreign currencies relative to the
U.S. dollar may be a factor in the overall performance of the fund.
To protect against adverse movements in exchange rates between currencies, the
fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.
When the manager believes that a particular currency may decline in value
compared to the U.S.
Prospectus Information Regarding the Fund 7
dollar, the fund may enter into forward currency exchange contracts to sell the
value of some or all of the fund's portfolio securities either denominated in,
or whose value is tied to, that currency. This practice is sometimes referred to
as "portfolio hedging." The fund may not enter into a portfolio hedging
transaction where it would be obligated to deliver an amount of foreign currency
in excess of the aggregate value of its portfolio securities or other assets
denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed appropriate by
the manager. However, it is anticipated that the fund will enter into portfolio
hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of the
fund's assets will be committed to a segregated account in connection with
portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and there
is no assurance that any attempt to protect the fund against adverse currency
movements through the use of forward currency exchange contracts will be
successful. In addition, the use of forward currency exchange contracts tends to
limit the potential gains that might result from a positive change in the
relationships between the foreign currency and the U.S. dollar.
PORTFOLIO TURNOVER
The portfolio turnover rate of the fund is shown in the financial information on
page 5 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and, accordingly,
the annual portfolio turnover rate cannot be anticipated.
The portfolio turnover of the fund may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost that the fund pays directly.
Portfolio turnover may also affect the character of capital gains, if any,
realized and distributed by the fund since short-term capital gains are taxable
as ordinary income.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase obligation,
a repurchase agreement can be considered a loan collateralized by the security
purchased. The fund's risk is the ability of the seller to pay the agreed-upon
repurchase price on the repurchase date. If the seller defaults, the fund may
incur costs in disposing of the collateral, which would reduce the amount
realized thereon. If the seller seeks relief under the bankruptcy laws, the
disposition of the collateral may be delayed or limited. To the extent the value
of the security decreases, the fund could experience a loss.
The fund will limit repurchase agreement transactions to securities issued by
the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the fund's Board of Directors.
The fund will invest no more than 15% of its assets in repurchase agreements
maturing in more than seven days.
8 Information Regarding the Fund American Century Investments
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund may
invest in securities that are commonly referred to as "derivative" securities.
Generally, a derivative is a financial arrangement the value of which is based
on, or "derived" from, a traditional security, asset, or market index. Certain
derivative securities are more accurately described as "index/structured"
securities. Index/structured securities are derivative securities whose value or
performance is linked to other equity securities (such as depositary receipts),
currencies, interest rates, indices or other financial indicators ("reference
indices").
Some "derivatives" such as mortgage-related and other asset-backed securities
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices, or currency exchange rates and for cash management purposes as a
low-cost method of gaining exposure to a particular securities market without
investing directly in those securities.
The fund may not invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment since the funds may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
The Board of Directors has approved the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the Board will
review the manager's policy for investments in derivative securities annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets taken at market. Interest on
loaned securities may not exceed 10% of the annual gross income of the fund
(without offset for realized capital gains). The portfolio lending policy
described in this paragraph is a fundamental policy that may be changed only by
a vote of a majority of the fund's shareholders.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued basis
without limit when, in the opinion of the manager, such purchases will further
the investment objectives of the fund. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery of and
payment for these securities typically occur
Prospectus Information Regarding the Fund 9
15 to 45 days after the commitment to purchase. Market rates of interest on debt
securities at the time of delivery may be higher or lower than those contracted
for on the when-issued security. Accordingly, the value of such security may
decline prior to delivery, which could result in a loss to the fund. A separate
account for the fund consisting of cash or high-quality liquid debt securities
in an amount at least equal to the when-issued commitments will be established
and maintained with the custodian. No income will accrue to the fund prior to
delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they present
attractive investment opportunities that otherwise meet the fund's criteria for
selection. Rule 144A securities are securities that are privately placed with
and traded among qualified institutional investors rather than the general
public. Although Rule 144A securities are considered "restricted securities,"
they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission has taken the position that the liquidity of
such securities in the portfolio of a fund offering redeemable securities is a
question of fact for the Board of Directors to determine, such determination to
be based upon a consideration of the readily available trading markets and the
review of any contractual restrictions. The staff also acknowledges that, while
the Board retains ultimate responsibility, it may delegate this function to the
manager. Accordingly, the Board has established guidelines and procedures for
determining the liquidity of Rule 144A securities and has delegated the
day-to-day function of determining the liquidity of Rule 144A securities to the
manager. The Board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain qualified
institutional investors, the liquidity of such securities may be limited
accordingly and the fund may, from time to time, hold a Rule 144A security that
is illiquid. In such an event, the fund's manager will consider appropriate
remedies to minimize the effect on the fund's liquidity. The fund may not invest
more than 15% of its assets in illiquid securities (securities that may not be
sold within seven days at approximately the price used in determining the net
asset value of fund shares).
SHORT SALES
The fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns at a
current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code.
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund performance may
be shown by presenting one or more performance measurements, including
cumulative total return, average annual total return, and yield. Performance
data may be quoted separately for the Institutional Class and for the other
classes offered by the fund.
Cumulative total return data is computed by considering all elements of return,
including reinvestment of dividends and capital gains distributions, over a
stated period of time. Average annual total return is determined by computing
the annual compound return over a stated period of time that would have produced
the fund's cumulative total return over the same period if the fund's
performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period expressed as
a percentage of the fund's share price.
Yield is calculated by adding over a 30-day (or one-month) period all interest
and dividend income (net of fund expenses) calculated on each day's market
values, dividing this sum by the average number of fund shares outstanding
during the period, and expressing the result as a percentage of the fund's share
price on the last day of the 30-day (or one-month) period. The percentage is
then annualized. Capital gains and losses are not included in the calculation.
10 Information Regarding the Fund American Century Investments
Yields are calculated according to accounting methods that are standardized in
accordance with SEC rules for all stock and bond funds. Because yield accounting
methods differ from the methods used for other accounting purposes, the fund's
yield may not equal the income paid on your shares or the income reported in the
fund's financial statements.
The fund may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be presented in a table, graph or other illustration. In
addition, fund performance may be compared to well-known indices of market
performance including the Standard & Poor's (S&P) 500 Index and the Dow Jones
Industrial Average. Fund performance may also be compared, on a relative basis,
to other funds in our fund family. This relative comparison, which may be based
upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text. Fund
performance may also be combined or blended with other funds in our fund family,
and that combined or blended performance may be compared to the same indices to
which individual funds may be compared.
All performance information advertised by the fund is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Prospectus Information Regarding the Fund 11
HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
The Balanced Fund is a part of the American Century Investments family of mutual
funds. Our family provides a full range of investment opportunities, from the
aggressive equity growth funds in our Twentieth Century Group, to the fixed
income funds in our Benham Group, to the moderate risk and specialty funds in
our American Century Group. Please call 1-800-345-3533 for a brochure or
prospectuses for the other funds in the American Century Investments family.
INVESTING IN AMERICAN CENTURY
The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through a bank,
broker-dealer or other financial intermediary, the following sections, as well
as the information contained in our Investor Services Guide, may not apply to
you. Please read "Minimum Investment," page 13 and "Customers of Banks,
Broker-Dealers and Other Financial Intermediaries," page 17.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing your
taxpayer identification number. (You must also certify whether you are subject
to withholding for failing to report income to the IRS.) Investments received
without a certified taxpayer identification number will be returned.
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S. dollars to
American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or mail
a completed application and provide your bank with the following information:
o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64141
o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more
than one, leave blank and see Bank to Bank Information below.
o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
o Taxpayer identification or Social Security number.
o If more than one account, account numbers and amount to be
invested in each account.
o Current tax year, previous tax year or rollover designation if an
IRA. Specify whether IRA, SEP-IRA or SARSEP-IRA.
BY EXCHANGE
Call 1-800-345-3533 from 7 a.m. to 7 p.m. Central time to get information on
opening an account by exchanging from another American Century account. See page
13 for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of our
Investors Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
12 How to Invest with American Century InvestmentsAmerican Century Investments
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or government
direct deposit (see "Automatic Investment Plan," this page) or by any of the
methods below. The minimum investment requirement for subsequent investments:
$250 for checks submitted without the remittance portion of a previous statement
or confirmation, $50 for all other types of subsequent investments.
BY MAIL
When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Once your account is open, you may make investments by telephone if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account. You may call an Institutional Service Representative.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on page 12 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investors Centers.
The locations of our three Investors Centers are listed on pages 12 and 13.
AUTOMATIC INVESTMENT PLAN
You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Institutional Service Representatives.
MINIMUM INVESTMENT
The minimum investment is $5 million ($3 million for endowments and
foundations). If you invest with us through a bank, broker-dealer or other
financial intermediary, the minimum investment requirement may be met by
aggregating the investments of various clients of your financial intermediary.
The minimum investment requirement may be waived if you or your financial
intermediary, if applicable, has an aggregate investment in our family of funds
of $10 million or more ($5 million for endowments and foundations). If your
balance or the balance of your financial intermediary, if applicable, falls
below the minimum investment requirements due to redemptions or exchanges, we
reserve the right to convert your shares to Investor Class shares of the same
fund. The Investor Class shares have a unified management fee that is 0.20%
higher than the Institutional Class shares.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange your
fund shares to our other funds up to six times per year per account. An exchange
request will be processed as of the same day it is received, if it is received
before the funds' net asset values are calculated, which is one hour prior to
the close of the New York Stock Exchange for funds issued by the American
Century Target Maturities Trust, and at the close of the Exchange for all of our
other funds. See "When Share Price is Determined," page 18.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
If, in any 90-day period, the total of your exchanges and your redemptions from
any one account exceeds the lesser of $250,000 or 1% of the fund's assets, fur-
Prospectus How to Invest with American Century Investments 13
ther exchanges will be subject to special requirements to comply with our policy
on large redemptions. See "Special Requirements for Large Redemptions," this
page.
BY MAIL
You may direct us in writing to exchange your shares from one American Century
account to another. For additional information, please see our Investor Services
Guide.
BY TELEPHONE
You can make exchanges over the telephone if you have authorized us to accept
telephone instructions. You can authorize this by selecting "Full Services" on
your application or by calling one of our Institutional Service Representatives
at 1-800-345-3533 to get the appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be made
at the next net asset value determined after a complete redemption request is
received. For large redemptions, please read "Special Requirements for Large
Redemptions," this page.
Please note that a request to redeem shares in an IRA or 403(b) plan must be
accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a redemption
form, which we will send you upon request, or by a letter to us. Certain
redemptions may require a signature guarantee. Please see "Signature Guarantee,"
page 15.
BY TELEPHONE
If you have authorized us to accept telephone instructions, you may redeem your
shares by calling an Institutional Service Representative.
BY CHECK-A-MONTH
You may redeem shares by Check-A-Month. A Check-A-Month plan automatically
redeems enough shares each month to provide you with a check in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.
OTHER AUTOMATIC REDEMPTIONS
You may elect to make redemptions automatically by authorizing us to send funds
to you or to your account at a bank or other financial institution. To set up
automatic redemptions, call one of our Institutional Service Representatives.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered owner
of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Once the funds are transmitted, the time of receipt and the funds' availability
are not under our control.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
We have elected to be governed by Rule18f-1 under the Investment Company Act,
which obligates the fund make certain redemptions in cash. This requirement to
pay redemptions in cash applies to situations where one shareholder redeems,
during any 90-day period, up to the lesser of $250,000 or 1% of the assets of
the fund. Although redemptions in excess of this limitation will also normally
be paid in cash, we reserve the right under unusual circumstances to honor these
redemptions by making payment in whole or in part in readily marketable
securities (a "redemption-in-kind").
14 How to Invest with American Century Investments American Century Investments
If payment is made in securities, the securities will be selected by the fund,
will be valued in the same manner as they are in computing the fund's net asset
value and will be provided without prior notice.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.
Despite the fund's right to redeem fund shares through a redemption-in-kind, we
do not expect to exercise this option unless the fund has an unusually low level
of cash to meet redemptions and/or is experiencing unusually strong demands for
its cash. Such a demand might be caused, for example, by extreme market
conditions that result in an abnormally high level of redemption requests
concentrated in a short period of time. Absent these or similar circumstances,
we expect redemptions in excess of $250,000 to be paid in cash in any fund with
assets of more than $50 million if total redemptions from any one account in any
90-day period do not exceed one-half of 1% of the total assets of the fund.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a signature
guarantee. Which transactions will require a signature guarantee will depend on
which service options you elect when you open your account. For example, if you
choose "In Writing Only," a signature guarantee would be required when:
o redeeming more than $25,000; or
o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.
You can obtain a signature guarantee from a bank or trust company, credit union,
broker-dealer, securities exchange or association, clearing agency or savings
association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if you
live outside the United States and would like to know how to obtain a signature
guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction, or to
change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several service options to make your account easier to manage. These
are listed on the account application. Please make note of these options and
elect the ones that are appropriate for you. Be aware that the "Full Services"
option offers you the most flexibility. You will find more information about
each of these service options in our Investor Services Guide.
Our special shareholder services include:
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy shares
of a variable-priced fund by exchange from one of our money market funds, or a
price at which to sell shares of a variable-priced fund by exchange to one of
our money market funds. The designated purchase price must be equal to or lower,
or the designated sale price equal to or higher, than the variable-priced fund's
net asset value at the time the order is placed. If the designated price is met
within 90 calendar days, we will execute your exchange order automatically at
that price (or better). Open orders not executed within 90 days will be
canceled.
If the fund you have selected deducts a distribution from its share price, your
order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are accepted
only by telephone or in person. These transactions are subject to exchange
limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
Prospectus How to Invest With American Century Investments 15
TAX-QUALIFIED RETIREMENT PLANS
This fund is available for your tax-deferred retirement plan. Call or write us
and request the appropriate forms for:
o Individual Retirement Accounts (IRAs);
o 403(b) plans for employees of public school systems and non-profit
organizations; or
o Profit sharing plans and pension plans for corporations and other
employers.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment. Please
refer to the Investor Services Guide for further information about the policies
discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.
(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated statement
that summarizes all of your American Century holdings, as well as an individual
statement for each fund you own that reflects all year-to-date activity in your
account. You may request a statement of your account activity at any time.
16 How to Invest with American Century InvestmentsAmerican Century Investments
With the exception of most automatic transactions, each time you invest, redeem,
transfer or exchange shares, we will send you a confirmation of the transaction.
See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your statements
and confirmations to ensure that your instructions were acted on properly.
Please notify us immediately in writing if there is an error. If you fail to
provide notification of an error with reasonable promptness, i.e., within 30
days of non-automatic transactions or within 30 days of the date of your
consolidated quarterly statement, in the case of automatic transactions, we will
deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you may use
in completing your U.S. income tax return. See the Investor Services Guide for
more information.
Each year, we will send you an annual and a semiannual report relating to your
fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully as
they will help you understand your fund.
CUSTOMERS OF BANKS, BROKER-DEALERS
AND OTHER FINANCIAL INTERMEDIARIES
Information contained in our Investor Services Guide pertains to shareholders
who invest directly with American Century rather than through a bank,
broker-dealer or other financial intermediary.
If you own or are considering purchasing fund shares through a bank,
broker-dealer or other financial intermediary, your ability to purchase,
exchange and redeem shares will depend on your agreement with, and the policies
of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your financial intermediary.
Prospectus How to Invest with American Century Investments 17
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares is also referred to as their net asset value. Net asset
value is determined by calculating the total value of the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by the American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after receipt by us of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or our agents before the time as of which the
net asset value is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined as of, the next
day the Exchange is open.
Investments are considered received only when payment is received by us. Wired
funds are considered received on the day they are deposited in our bank account
if they are deposited before the time as of which the net asset value of the
fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw on
your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day by
mail prior to the time as of which the net asset value of the fund is
determined, will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through a bank, financial advisor or other
financial intermediary, it is the responsibility of your financial intermediary
to transmit your purchase, exchange and redemption requests to the fund's
transfer agent prior to the applicable cut-off time for receiving orders and to
make payment for any purchase transactions in accordance with the fund's
procedures or any contractual arrangements with the fund or the fund's
distributor in order for you to receive that day's price.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is
18 Additional Information You Should Know American Century Investments
normally completed at various times before the close of business on each day
that the New York Stock Exchange is open. If an event were to occur after the
value of a security was established but before the net asset value per share was
determined that was likely to materially change the net asset value, then that
security would be valued at fair value as determined in accordance with
procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock Exchange
is not open and on which the fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of the fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset value of the Investor Class of the fund is published in leading
newspaper daily. The net asset value of the Institutional Class may be obtained
by calling us.
DISTRIBUTIONS
Distributions from net investment income are declared and paid quarterly.
Distributions from net realized securities gains, if any, are declared and paid
once a year, but the fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code, in all
events in a manner consistent with the provisions of the Investment Company Act.
For shareholders investing through taxable accounts, distributions will be
reinvested unless you elect to receive them in cash. Distributions of less than
$10 generally will be reinvested. Distributions made shortly after a purchase by
check or ACH may be held up to 15 days. You may elect to have distributions on
shares held in Individual Retirement Accounts and 403(b) plans paid in cash only
if you are at least 591/2 years old or permanently and totally disabled.
Distribution checks normally are mailed within seven days after the record date.
Please consult our Investor Services Guide for further information regarding
your distribution options.
A distribution on shares of the fund does not increase the value of your shares
or your total return. At any given time the value of your shares includes the
undistributed net gains, if any, realized by the fund on the sale of portfolio
securities, and undistributed dividends and interest received, less fund
expenses.
Because such gains and dividends are included in the value of your shares prior
to distribution, when they are distributed the value of your shares is reduced
by the amount of the distribution. If you buy your shares through a taxable
account just before the distribution, you will pay the full price for your
shares, and then receive a portion of the purchase price back as a taxable
distribution. See "Taxes," this page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a qualified
employer-sponsored retirement or savings plan (excluding participant-directed
employer-sponsored retirement plans, which are ineligible to invest in
Institutional Class shares), income and capital gains distributions paid by the
fund will generally not be subject to current taxation, but will accumulate in
your account on a tax-deferred basis.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. Distributions from net long-term capital gains are taxable as
long-term capital gains regardless of the length of time you have held the
shares on which such distributions are paid. However, you should note that any
loss realized upon the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of any distribution of
long-term capital gain to you with respect to such shares.
Prospectus Additional Information You Should Know 19
Dividends and interest received by the fund on foreign securities may give rise
to withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Foreign countries generally do not impose taxes on capital gains in
respect of investments by non-resident investors. The foreign taxes paid by the
fund will reduce its dividends.
If more than 50% of the value of the fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that fund shareholders may be able to claim a
foreign tax credit in lieu of a deduction for foreign income taxes paid by the
fund. If such an election is made, the foreign taxes paid by the fund will be
treated as income received by you.
If the fund purchases the securities of certain foreign investment funds or
trusts called passive foreign investment companies, capital gains on the sale of
such holdings will be deemed to be ordinary income regardless of how long the
fund holds its investment. The fund may also be subject to corporate income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains are distributed to
shareholders. In the alternative, the fund may elect to recognize cumulative
gains on such investments as of the last day of its fiscal year and distribute
it to shareholders.
Distributions are taxable to you regardless of whether they are taken in cash or
reinvested, even if the value of your shares is below your cost. If you purchase
shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains.
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions may also be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue Code,
we are required by federal law to withhold and remit to the IRS 31% of
reportable payments (which may include dividends, capital gains distributions
and redemptions). Those regulations require you to certify that the Social
Security number or tax identification number you provide is correct and that you
are not subject to 31% withholding for previous under-reporting to the IRS. You
will be asked to make the appropriate certification on your application.
Payments reported by us that omit your Social Security number or tax
identification number will subject us to a penalty of $50, which will be charged
against your account if you fail to provide the certification by the time the
report is filed, and is not refundable.
Redemption of shares of the fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.
20 Additional Information You Should Know American Century Investments
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the fund. Acting pursuant to an
investment management agreement entered into with the fund, American Century
Investment Management, Inc. serves as the investment manager of the fund. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The manager has been providing investment services to
investment companies and institutional clients, since it was founded in 1958.
In June 1995, American Century Companies, Inc. ("ACC"), the parent of the
manager, acquired Benham Management International, Inc. In the acquisition,
Benham Management Corporation ("BMC"), the investment advisor to the Benham
Group of mutual funds, became a wholly owned subsidiary of ACC. Certain
employees of BMC provide investment management services to funds managed by the
manager, while certain employees of the manager provide investment management
services to funds managed by BMC.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the fund's portfolio as it deems appropriate in pursuit of the fund's investment
objectives. Individual portfolio manager members of the team may also adjust
portfolio holdings of the fund as necessary between team meetings.
The portfolio manager members of the team managing Balanced and their work
experience for the last five years are as follows:
JAMES E. STOWERS III, President and Portfolio Manager, joined American Century
in 1981. He is a member of the team that manages the equity portion of Balanced.
BRUCE A. WIMBERLY, Portfolio Manager, joined American Century in September 1994
as an Investment Analyst, a position he held until July 1996. At that time he
was promoted to Portfolio Manager. Prior to joining American Century, Mr.
Wimberly attended Kellogg Graduate School of Management, Northwestern University
from August 1992 to August 1994, where he obtained his MBA degree. Prior to that
he served as a Research Analyst for Frontier Capital Management Company, Boston,
Massachusetts. Mr. Wimberly is a member of the team that manages the equity
portion of Balanced.
NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio Manager,
joined American Century as Vice President and Portfolio Manager in November
1989. In April 1993, he became Senior Vice President. He is a member of the team
that manages the fixed income portion of Balanced.
JEFFREY L. HOUSTON, Portfolio Manager, has worked for American Century since
November 1990. He is a member of the team that manages the fixed income portion
of Balanced.
The activities of the manager are subject only to directions of the fund's Board
of Directors. The manager pays all the expenses of the fund except brokerage,
taxes, interest, fees and expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the Institutional Class of the fund, the manager
receives an annual fee of 0.80% of the average net assets of the fund.
On the first business day of each month, the fund pays a management fee to the
manager for the previous month at the rate specified. The fee for the previous
month is calculated by multiplying the applicable fee for such series by the
aggregate average daily closing value of the series' net assets during the
previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the fund's portfolio
obtain preclearance before executing personal trades.
Prospectus Additional Information You Should Know 21
With respect to portfolio managers and other investment personnel, the Code of
Ethics prohibits acquisition of securities in an initial public offering, as
well as profits derived from the purchase and sale of the same security within
60 calendar days. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the fund.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend-paying agent for the fund. It
provides facilities, equipment and personnel to the fund, and is paid for such
services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the fund as a funding medium, by broker-dealers and financial advisors
for their customers investing in shares of American Century or by sponsors of
multi mutual fund no- or low-transaction fee programs.
Although there is no sales charge levied by the fund, transactions in shares of
the fund may be executed by brokers or investment advisors who charge a
transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the fund or the
investment manager. You should be aware of the fact that these transactions may
be made directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the manager.
The manager and transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., Chairman of the fund's Board of Directors,
controls American Century Companies by virtue of his ownership of a majority of
its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services, Inc.,
a registered broker-dealer and an affiliate of the manager. The manager pays all
expenses for promoting sales of, and distributing the fund shares offered by
this Prospectus. The Institutional Class of shares does not pay any commissions
or other fees to the distributor or to any other broker-dealers or financial
intermediaries in connection with the distribution of fund shares.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Mutual Funds, Inc., issuer of the fund, was organized as a
Maryland corporation on July 2, 1990. The corporation commenced operations on
February 28, 1991, the date it merged with Twentieth Century Investors, Inc., a
Delaware corporation which had been in business since October 1958. Pursuant to
the terms of the Agreement and Plan of Merger dated July 27, 1990, the Maryland
corporation was the surviving entity and continued the business of the Delaware
corporation with the same officers and directors, the same shareholders and the
same investment objectives, policies and restrictions.
The principal office of the fund is American Century Tower, 4500 Main Street,
P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by
mail to that address, or by telephone to 1-800-345-3533 (international calls:
816-531-5575).
American Century Mutual Funds, Inc. issues 17 series of $.01 par value shares.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian.
American Century offers four classes of the fund: an Investor Class, an
Institutional Class, a Service Class, and the Advisor Class. The shares offered
by this Prospectus are Institutional Class shares and have no up-front charges,
commissions, or 12b-1 fees.
The Investor Class is primarily made available to retail investors. The Service
Class and Advisor Class are primarily offered to institutional investors or
through institutional distribution channels, such as
22 Additional Information You Should Know American Century Investments
employer-sponsored retirement plans or through banks, broker-dealers, insurance
companies or other financial intermediaries. The other classes have different
fees, expenses, and/or minimum investment requirements than the Institutional
Class. The difference in the fee structures among the classes is the result of
their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. Accordingly, the core investment advisory expenses
do not vary by class. Different fees and expenses will affect performance. For
additional information concerning the Investor Class of shares, call one of our
Investor Services Representatives at 1-800-345-2021. For information concerning
the Service or Advisor Classes of shares, call one of our Institutional Service
Representatives at 1-800-345-3533 or contact a sales representative or financial
intermediary who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
Each share, irrespective of series or class, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except for
those matters which must be voted on separately by the series or class of shares
affected. Matters affecting only one series or class are voted upon only by that
series or class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for the
fund to hold annual meetings of shareholders. As a result, shareholders may not
vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's bylaws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
Prospectus Additional Information You Should Know 23
NOTES
24 Notes American Century Investments
NOTES
Notes 25
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0700
Fax: 816-340-4655
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7774 Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo]
American
Century(sm)
MARCH 1, 1997
AMERICAN CENTURY
MUTUAL FUNDS, INC.
[FRONT COVER]
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1997
AMERICAN CENTURY MUTUAL FUNDS, INC.
This statement is not a prospectus but should be read in conjunction with
American Century's current prospectuses dated March 1, 1997. Please retain this
document for future reference. To obtain a prospectus, call American Century
toll-free at 1-800-345-2021 (international calls: 816-531-5575), or write to
P.O. Box 419200, Kansas City, Missouri 64141-6200.
TABLE OF CONTENTS
Investment Objectives of the Funds ............................2
Fundamental Policies of the Funds .............................2
Additional Investment Restrictions ............................4
Forward Currency Exchange Contracts ...........................6
An Explanation of Fixed Income Securities Ratings .............7
Short Sales ...................................................8
Portfolio Turnover ............................................8
Interest Rate Futures Contracts and Related Options ...........9
Municipal Leases .............................................13
Officers and Directors .......................................13
Management ...................................................15
Custodians ...................................................17
Independent Accountants ......................................17
Capital Stock ................................................17
Multiple Class Structure .....................................18
Brokerage ....................................................20
Performance Advertising ......................................21
Redemptions in Kind ..........................................23
Holidays .....................................................23
Financial Statements .........................................23
Statement of Additional Information 1
INVESTMENT OBJECTIVES OF THE FUNDS
The investment objective of each fund comprising American Century Mutual
Funds, Inc. is described on page 2 of the applicable prospectus. One feature of
the various series of shares (funds) merits further explanation. As described in
the Growth Funds Prospectus, the chief investment difference among Growth, Ultra
and Vista, and between Select and Heritage, is the size of the fund, which
affects the nature of the investments in the fund's portfolio. A smaller fund
tends to be more responsive to changes in the value of its portfolio securities.
For example, if a $1,000,000 fund buys $5,000 of stock which then doubles in
value, the value of the fund increases by only one-half of 1%. However, if a
$100,000 fund buys $5,000 of such stock which then doubles in value, the value
of the fund increases by 5%, or at a rate 10 times as great. By the same token,
if the value of such stock declines by one-half, the small fund would decline in
value by 2.5%, while the larger fund would decline in value by only one-half of
1% or at a rate only one-tenth as great. Thus, a small fund with the same
objective as a large fund, and similarly managed, likely will have a greater
potential for profit and for loss as well.
FUNDAMENTAL POLICIES OF THE FUNDS
In achieving its objective, a fund must conform to certain fundamental
policies that may not be changed without shareholder approval, as follows:
SELECT, HERITAGE, GROWTH, ULTRA, VISTA, GIFTRUST, NEW OPPORTUNITIES AND THE
EQUITY INVESTMENTS OF BALANCED
In general, within the restrictions outlined herein, American Century has
broad powers with respect to investing funds or holding them uninvested.
Investments are varied according to what is judged advantageous under changing
economic conditions. It is our policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held subject to the investment restrictions
described below. It is the manager's intention that each of these portfolios
will generally consist of common stocks. However, the manager may invest the
assets of each series in varying amounts in other instruments and in senior
securities, such as bonds, debentures, preferred stocks and convertible issues,
when such a course is deemed appropriate in order to attempt to attain its
financial objective. Senior securities that, in the opinion of the manager, are
high-grade issues may also be purchased for defensive purposes. [Note: The above
statement of fundamental policy gives American Century authority to invest in
securities other than common stocks and traditional debt and convertible issues.
Though the funds have not made such investments in the past, the manager may
invest in master limited partnerships (other than real estate partnerships) and
royalty trusts which are traded on domestic stock exchanges when such
investments are deemed appropriate for the attainment of the funds' investment
objectives.]
BALANCED
The manager will invest approximately 60% of the Balanced portfolio in
common stocks and the balance in fixed income securities. Common stock
investments are described above. At least 80% of the fixed income assets will be
invested in securities that are rated at the time of purchase by a nationally
recognized statistical rating organization to be within the three highest
categories. The fund may invest in securities of the United States government
and its agencies and instrumentalities, corporate, sovereign government,
municipal, mortgage-backed, and other asset-backed securities. It can be
expected that management will invest from time to time in bonds and preferred
stock convertible into common stock.
CASH RESERVE
The manager will invest the Cash Reserve portfolio in debt securities
payable in United States currency. Such securities may be obligations issued or
guaranteed by the United States government or its agencies and instrumentalities
or obligations issued by corporations and others, including repurchase
agreements, of such quality and with such maturities to permit Cash Reserve to
be designated as a money market fund and to enable it to maintain a stable
offering price per share.
The fund operates pursuant to a rule under the Investment Company Act that
permits valuation of portfolio securities on the basis of amortized cost. As
required by the rule, the Board of Directors has
2 American Century Investments
adopted procedures designed to stabilize, to the extent reasonably possible, the
fund's price per share as computed for the purpose of sales and redemptions at
$1.00. While the day-to-day operation of the fund has been delegated to the
manager, the quality requirements established by the procedures limit
investments to certain United States dollar-denominated instruments which the
board of directors has determined present minimal credit risks and which have
been rated in one of the two highest rating categories as determined by a
nationally recognized statistical rating organization or, in the case of an
unrated security, of comparable quality. The procedures require review of the
fund's portfolio holdings at such intervals as are reasonable in light of
current market conditions to determine whether the fund's net asset value
calculated by using available market quotations deviates from the per-share
value based on amortized cost. The procedures also prescribe the action to be
taken if such deviation should occur.
SHORT-TERM GOVERNMENT FUND AND
INTERMEDIATE-TERM GOVERNMENT FUND
The manager will invest the portfolios of Short-Term Government Fund and
Intermediate-Term Government Fund in direct obligations of the United States,
such as Treasury bills, Treasury notes and U.S. government bonds, that are
supported by the full faith and credit of the United States. The manager may
also invest in agencies and instrumentalities of the United States government
that are established under the authority of an act of Congress. The securities
of some of such agencies and instrumentalities are supported by the full faith
and credit of the United States Treasury; others are supported by the right of
the issuer to borrow from the Treasury; still others are supported only by the
credit of the instrumentality. Such agencies and instrumentalities include, but
are not limited to, the Government National Mortgage Association, Federal
National Mortgage Association, Federal Home Loan Mortgage Corporation, Student
Loan Marketing Association, Federal Farm Credit Banks, Federal Home Loan Banks,
and Resolution Funding Corporation. Purchase of such securities may be made
outright or on a when-issued basis and may be made subject to repurchase
agreements.
LIMITED-TERM BOND, INTERMEDIATE-TERM BOND AND BENHAM BOND
The manager will invest the portfolios of the corporate bond funds in high-
and medium-grade debt securities payable in United States currency. The funds
may invest in securities that, at the time of purchase, are rated by a
nationally recognized statistical rating organization or, if not rated, are of
equivalent investment quality as determined by the management, as follows:
short-term notes within the two highest categories; corporate, sovereign
government and municipal bonds within the four highest categories; securities of
the United States government and its agencies and instrumentalities; and other
types of securities rated at least P-2 by Moody's or A-2 by S&P. The funds may
also purchase securities under repurchase agreements as described in the
prospectus and purchase and sell interest rate futures contracts and related
options. See "Interest Rate Futures Contracts and Related Options," page 9.
LIMITED-TERM TAX-EXEMPT, INTERMEDIATE-TERM TAX-EXEMPT AND LONG-TERM TAX-EXEMPT
The manager will invest the tax-exempt portfolios in high- and medium-grade
securities. At least 80% of each fund's net assets will be invested in
securities whose income is not subject to federal income taxes, including the
alternative minimum tax.
The two principal classifications of tax-exempt securities are notes and
bonds. Tax-exempt notes are of short maturity, generally less than three years,
and are issued to provide for short-term capital needs. These include tax
anticipation notes and revenue anticipation notes, among others, as well as
tax-exempt commercial paper. Tax-exempt bonds, which meet long-term capital
needs, generally have maturities longer than one year. The two categories of
tax-exempt bonds, general obligation and revenue, may be held by the funds in
any proportion. General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a project or
facility or from the proceeds of a specific revenue source, but not from the
general taxing power. Industrial development revenue bonds are a type of revenue
bond secured by payments from a private user, and generally do not
Statement of Additional Information 3
enjoy a call upon the resources of the municipality that issued the bond on
behalf of the user.
The funds may invest in fixed-, floating- and variable-rate securities.
Fixed-rate securities pay interest at the fixed rate until maturity. Floating-
and variable-rate securities normally have a stated maturity in excess of one
year, but may have a provision permitting the holder to demand payment of
principal and interest upon not more than seven days' notice. Floating rates of
interest are tied to a percentage of a designated base rate, such as rates on
Treasury bills or the prime rate at a major bank, and change whenever the
designated rate changes. Variable-rate securities provide for a periodic
adjustment in the rate.
For the purpose of determining the maturity of an individual security or
the average weighted portfolio maturity of one of the funds, the manager shall
consider the maturity to be the shorter of final maturity, the remaining
expected average life of a sinking fund bond, the remaining time until a
mandatory put date, the time until payment as the result of exercising a put or
demand-for-payment option, or the remaining time until the pre-refunding payment
date of a security whose redemption on a call date in advance of final maturity
is assured through contractual agreement and with high-quality collateral in
escrow.
The funds may invest in securities that, at the time of purchase, are rated
by a nationally recognized statistical rating organization or, if not rated, are
of equivalent investment quality as determined by the management, as follows:
short-term notes within the two highest categories, bonds within the four
highest categories, and other types of securities rated at least P-2 by Moody's
or A-2 by S&P. The funds may invest more than 25% of their assets in industrial
development revenue bonds. Each of the funds may invest in interest rate futures
contracts and related options. See "Interest Rate Futures Contracts and Related
Options," page 9.
BENHAM BOND, LIMITED-TERM TAX-EXEMPT,
INTERMEDIATE-TERM TAX-EXEMPT AND LONG-TERM TAX-EXEMPT
Benham Bond, Limited-Term Tax-Exempt, Intermediate-Term Tax-Exempt and
Long-Term Tax-Exempt (the funds) may buy and sell interest rate futures
contracts relating to debt securities ("debt futures," i.e., futures relating to
debt securities, and "bond index futures," i.e., futures relating to indexes on
types or groups of bonds) and write and buy put and call options relating to
interest rate futures contracts for the purpose of hedging against (i) declines
or possible declines in the market value of debt securities or (ii) inability to
participate in advances in the market values of debt securities at times when
the funds are not fully invested in long-term debt securities; provided that,
the funds may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on a fund's
existing futures positions and premiums paid for related options would exceed 5%
of the fund's assets.
ADDITIONAL INVESTMENT RESTRICTIONS
Additional fundamental policies that may be changed only with shareholder
approval provide that, with the exception of New Opportunities, each series of
shares:
(1) Shall not invest more than 15% of its assets in illiquid investments,
except for any fund intended to be a money market fund, which shall not
invest more than 10% of its assets in illiquid investments.
(2) Shall not invest in the securities of companies that, including
predecessors, have a record of less than three years of continuous
operation.
(3) Shall not lend its portfolio securities except to unaffiliated persons, and
is subject to the rules and regulations adopted under the Investment
Company Act. No such rules and regulations have been promulgated, but it is
the corporation's policy that such loans must be secured continuously by
cash collateral maintained on a current basis in an amount at least equal
to the market value of the securities loaned, or by irrevocable letters of
credit. During the existence of the loan, the corporation must continue to
receive the equivalent of the interest and dividends paid by the issuer on
the securities loaned and interest on the investment of the collateral; the
corporation must have the right to call the loan and obtain the securities
loaned at any time on five days' notice, including the right to call the
loan to enable the corporation to vote the securities. To comply with the
regulations of certain state secur-
4 American Century Investments
ities administrators, such loans may not exceed one-third of the
corporation's net assets taken at market. It is the policy of the
corporation not to permit interest on loaned securities of any series to
exceed 10% of the annual gross income of that series (without offset for
realized capital gains).
(4) Shall not purchase the security of any one issuer if such purchase would
cause more than 5% of the corporation's assets at market to be invested in
the securities of such issuer, except United States government securities,
or if the purchase would cause more than 10% of the outstanding voting
securities of any one issuer to be held in the corporation's portfolio.
(5) Shall not invest for control or for management, or concentrate its
investment in a particular company or a particular industry. No more than
25% of the assets of each series, exclusive of cash and government
securities, will be invested in securities of any one industry. The
corporation's policy in this respect includes the statement, "The
management's definition of the phrase `any one industry' shall be
conclusive unless clearly unreasonable." That statement may be ineffective
because it may be an attempt to waive a provision of the law, and such
waivers are void.
(6) Shall not buy securities on margin nor sell short (unless it owns, or by
virtue of its ownership of, other securities has the right to obtain
securities equivalent in kind and amount to the securities sold); however,
the corporation's funds may make margin deposits in connection with the use
of any financial instrument or any transaction in securities permitted by
their fundamental policies.
(7) Shall not invest in the securities of other investment companies except by
purchases in the open market involving only customary brokers' commissions
and no sales charges.
(8) Shall not issue any senior security.
(9) Shall not underwrite any securities.
(10) Shall not purchase or sell real estate. (In the opinion of management, this
restriction will not preclude the corporation from investing in securities
of corporations that deal in real estate.)
(11) Shall not purchase or sell commodities or commodity contracts; except that
Limited-Term Bond, Intermediate-Term Bond, Benham Bond, Limited-Term
Tax-Exempt, Intermediate-Term Tax-Exempt and Long-Term Tax-Exempt may, for
non-speculative purposes, buy or sell interest rate futures contracts on
debt securities (debt futures and bond index futures) and related options.
(12) Shall not borrow any money with respect to any series of its stock, except
in an amount not in excess of 5% of the total assets of the series, and
then only for emergency and extraordinary purposes; this does not prohibit
the escrow and collateral arrangements in connection with investment in
interest rate futures contracts and related options by Limited-Term Bond,
Intermediate-Term Bond, Benham Bond, Limited-Term Tax-Exempt,
Intermediate-Term Tax-Exempt and Long-Term Tax-Exempt.
Paragraphs 3, 5, 8 and 9 shall also apply as fundamental policies of New
Opportunities. Paragraphs 1, 2, 6, 7, 10, 11 and 12 shall also apply to New
Opportunities, but shall not be considered fundamental policies. Paragraph 4
shall apply to New Opportunities with respect to 75% of its portfolio and shall
not be considered a fundamental policy.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the corporation of securities issued by insurance companies,
brokers, dealers, underwriters or investment advisers, and upon transactions
with affiliated persons as therein defined. It also defines and forbids the
creation of cross and circular ownership. Neither the Securities and Exchange
Commission nor any other agency of the federal government participates in or
supervises the corporation's management or its investment practices or policies.
The Investment Company Act also provides that the funds may not invest more
than 25% of their assets in the securities of issuers engaged in a single
industry. In determining industry groups for purposes of this standard, the
Securities and Exchange Commission ordinarily uses the Standard Industry
Classification codes developed by the United States Office of Management and
Budget. In the interest of ensuring adequate diversification, the funds monitor
industry concentration
Statement of Additional Information 5
using a more restrictive list of industry groups than that recommended by the
SEC. The funds believe that these classifications are reasonable and are not so
broad that the primary economic characteristics of the companies in a single
class are materially different. The use of these restrictive industry
classifications may, however, cause the funds to forego investment possibilities
which may otherwise be available to them under the Investment Company Act.
Neither the SEC nor any other agency of the federal or state government
participates in or supervise the funds' management or their investment practices
or policies.
FORWARD CURRENCY EXCHANGE CONTRACTS
The funds conduct their foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward foreign currency exchange
contracts to purchase or sell foreign currencies.
The funds expect to use forward contracts under two circumstances:
(1) When the manager wishes to "lock in" the U.S. dollar price of a security
when a fund is purchasing or selling a security denominated in a foreign
currency, the fund would be able to enter into a forward contract to do so;
(2) When the manager believes that the currency of a particular foreign country
may suffer a substantial decline against the U.S. dollar, a fund would be
able to enter into a forward contract to sell foreign currency for a fixed
U.S. dollar amount approximating the value of some or all of its fund's
portfolio securities either denominated in, or whose value is tied to, such
foreign currency.
As to the first circumstance, when a fund enters into a trade for the
purchase or sale of a security denominated in a foreign currency, it may be
desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering
into forward contracts in U.S. dollars for the purchase or sale of a foreign
currency involved in an underlying security transaction, the fund will be able
to protect itself against a possible loss between trade and settlement dates
resulting from the adverse change in the relationship between the U.S. dollar at
the subject foreign currency.
Under the second circumstance, when the manager believes that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a foreign contract to sell for a fixed dollar
amount the amount in foreign currencies approximating the value of some or all
of its portfolio securities either denominated in, or whose value is tied to,
such foreign currency. The fund will place cash or high-grade liquid securities
in a separate account with its custodian in an amount sufficient to cover its
obligation under the contract. If the value of the securities placed in the
separate account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account equals the amount of
the fund's commitments with respect to such contracts.
The precise matching of forward contracts in the amounts and values of
securities involved would not generally be possible since the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward contract is entered into
and the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of short-term hedging strategy
is highly uncertain. The manager does not intend to enter into such contracts on
a regular basis. Normally, consideration of the prospect for currency parities
will be incorporated into the long-term investment decisions made with respect
to overall diversification strategies. However, the manager believes that it is
important to have flexibility to enter into such forward contracts when it
determines that a fund's best interests may be served.
Generally, a fund will not enter into a forward contract with a term of
greater than one year. At the maturity of the forward contract, the fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate the obligation to deliver the foreign
currency by purchasing an "offsetting" forward contract with the same currency
trader obligating the fund to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be
6 American Century Investments
necessary for a fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency the fund is obligated to deliver.
AN EXPLANATION OF FIXED INCOME SECURITIES RATINGS
As described in the applicable prospectus, certain of the funds will have,
at any given time, investments in fixed income securities. Those investments,
however, are subject to certain credit quality restrictions, as noted in the
applicable prospectus. The following is a description of the rating categories
referenced in the prospectus fund disclosure.
The following summarizes the highest four ratings used by Standard & Poor's
Corporation for bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes
and indicates very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics are given
a plus (+) designation.
The following summarizes the highest four ratings used by Moody's Investors
Service, Inc. for bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or by an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium-grade obligation. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Debt which is rated Baa is considered as a medium-grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such debt lacks outstanding investment characteristics and in
fact has speculative characteristics as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated Aa, A and Baa. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3
Statement of Additional Information 7
indicates that the bond ranks in the lower end of its generic rating category.
The rating Prime-1 or P-1 is the highest commercial paper rating assigned
by Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 or P-2 (or related supporting institutions)
are considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriated, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarized the highest rating used by Moody's for short-term
notes and variable rate demand obligations:
MIG-1; VMIG-1 - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
SHORT SALES
The common stock funds and the Balanced Fund may engage in short sales if,
at the time of the short sale, the fund owns or has the right to acquire an
equal amount of the security being sold short at no additional cost.
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account will be
maintained by the fund's custodian. While the short sale is open, the fund will
maintain in a segregated custodial account an amount of securities convertible
into, or exchangeable for, such equivalent securities at no additional cost.
These securities would constitute the fund's long position.
A fund may make a short sale, as described above, when it wants to sell the
security it owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes and for purposes of
satisfying certain tests applicable to regulated investment companies under the
Internal Revenue Code. In such a case, any future losses in the fund's long
position should be reduced by a gain in the short position. The extent to which
such gains or losses are reduced would depend upon the amount of the security
sold short relative to the amount the fund owns. There will be certain
additional transaction costs associated with short sales, but the fund will
endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds are shown in the Financial
Highlights table in the prospectuses.
With respect to each series of shares, the manager will purchase and sell
securities without regard to the length of time the security has been held and,
accordingly, it can be expected that the rate of portfolio turnover may be
substantial.
The funds intend to purchase a given security whenever the manager believes
it will contribute to the stated objective of the series, even if the same
security has only recently been sold. In selling a given security, the manager
keeps in mind that (1) profits from sales of securities held less than three
months must be limited in order to meet the requirements of Subchapter M of the
Internal Revenue Code, and (2) profits from sales of securities are taxed to
shareholders as ordinary income. Subject to those considerations, the
corporation will sell a given security, no matter for how long or for how short
a period it has been held in the portfolio, and no matter whether the sale is at
a gain or at a loss, if the manager believes that it is not fulfilling its
purpose, either because, among other things, it did not live up to the manager's
expectations, or because it may be replaced with another security holding
greater promise, or because it has reached its optimum potential, or because of
a change in the circumstances of a particular company
8 American Century Investments
or industry or in general economic conditions, or because of some combination of
such reasons.
When a general decline in security prices is anticipated, the equity funds
may decrease or eliminate entirely their equity positions and increase their
cash positions, and when a rise in price levels is anticipated, the equity funds
may increase their equity positions and decrease their cash positions. However,
these funds have followed the practice of remaining essentially fully invested
in equity securities.
Since investment decisions are based on the anticipated contribution of the
security in question to the corporation's objectives, the manager believes that
the rate of portfolio turnover is irrelevant when it believes a change is in
order to achieve those objectives, and the corporation's annual portfolio
turnover rate cannot be anticipated and may be comparatively high. This
disclosure regarding portfolio turnover is a statement of fundamental policy and
may be changed only by a vote of the shareholders.
Since the manager does not take portfolio turnover rate into account in
making investment decisions, (1) the manager has no intention of accomplishing
any particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates in the past should not be considered as a
representation of the rates which will be attained in the future.
INTEREST RATE FUTURES CONTRACTS AND RELATED
OPTIONS
Limited-Term Bond, Intermediate-Term Bond, Benham Bond, Limited-Term
Tax-Exempt, Intermediate-Term Tax-Exempt and Long-Term Tax-Exempt (the funds)
may buy and sell interest rate futures contracts relating to debt securities
("debt futures," i.e., futures relating to debt securities, and "bond index
futures," i.e., futures relating to indexes on types or groups of bonds) and
write and buy put and call options relating to interest rate futures contracts.
A fund will not purchase or sell futures contracts and options thereon for
speculative purposes but rather only for the purpose of hedging against changes
in the market value of its portfolio securities or changes in the market value
of securities that American Century Investment Management, Inc. (manager)
anticipates that it may wish to include in the portfolio of a fund. A fund may
sell a future or write a call or purchase a put on a future if the manager
anticipates that a general market or market sector decline may adversely affect
the market value of any or all of the fund's holdings. A fund may buy a future
or purchase a call or sell a put on a future if the manager anticipates a
significant market advance in the type of securities it intends to purchase for
the fund's portfolio at a time when the fund is not invested in debt securities
to the extent permitted by its investment policies. A fund may purchase a future
or a call option thereon as a temporary substitute for the purchase of
individual securities which may then be purchased in an orderly fashion. As
securities are purchased, corresponding futures positions would be terminated by
offsetting sales.
The "sale" of a debt future means the acquisition by the fund of an
obligation to deliver the related debt securities (i.e., those called for by the
contract) at a specified price on a specified date. The "purchase" of a debt
future means the acquisition by the fund of an obligation to acquire the related
debt securities at a specified time on a specified date. The "sale" of a bond
index future means the acquisition by the fund of an obligation to deliver an
amount of cash equal to a specified dollar amount times the difference between
the index value at the close of the last trading day of the future and the price
at which the future is originally struck. No physical delivery of the bonds
making up the index is expected to be made. The "purchase" of a bond index
future means the acquisition by the fund of an obligation to take delivery of
such an amount of cash.
Unlike when the fund purchases or sells a bond, no price is paid or
received by the fund upon the purchase or sale of the future. Initially, the
fund will be required to deposit an amount of cash or securities equal to a
varying specified percentage of the contract amount. This amount is known as
initial margin. Cash held in the margin account is not income producing.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying debt securities or index
fluctuates, making the future more or less valuable, a process known as mark to
the market. Changes in variation margin are recorded by the fund as unrealized
gains or losses. At any time prior to expiration
Statement of Additional Information 9
of the future, the fund may elect to close the position by taking an opposite
position that will operate to terminate its position in the future. A final
determination of variation margin is then made; additional cash is required to
be paid by or released to the fund and the fund realizes a loss or a gain.
When a fund writes an option on a futures contract it becomes obligated, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the term of the option. If a fund
has written a call, it becomes obligated to assume a "long" position in a
futures contract, which means that it is required to take delivery of the
underlying securities. If it has written a put, it is obligated to assume a
"short" position in a futures contract, which means that it is required to
deliver the underlying securities. When the fund purchases an option on a
futures contract it acquires a right in return for the premium it pays to assume
a position in a futures contract.
If a fund writes an option on a futures contract it will be required to
deposit initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an option
on a future are included in the initial margin deposit.
For options sold, the fund will segregate cash or high-quality debt
securities equal to the value of securities underlying the option unless the
option is otherwise covered.
A fund will deposit in a segregated account with its custodian bank
high-quality debt obligations maturing in one year or less, or cash, in an
amount equal to the fluctuating market value of long futures contracts it has
purchased less any margin deposited on its long position. It may hold cash or
acquire such debt obligations for the purpose of making these deposits.
Changes in variation margin are recorded by a fund as unrealized gains or
losses. Initial margin payments will be deposited in the fund's custodian bank
in an account registered in the broker's name; access to the assets in that
account may be made by the broker only under specified conditions. At any time
prior to expiration of a futures contract or an option thereon, a fund may elect
to close the position by taking an opposite position that will operate to
terminate its position in the futures contract or option. A final determination
of variation margin is made at that time; additional cash is required to be paid
by or released to it and it realizes a loss or gain.
Although futures contracts by their terms call for the actual delivery or
acquisition of the underlying securities or cash, in most cases the contractual
obligation is so fulfilled without having to make or take delivery. The funds do
not intend to make or take delivery of the underlying obligation. All
transactions in futures contracts and options thereon are made, offset or
fulfilled through a clearinghouse associated with the exchange on which the
instruments are traded. Although the funds intend to buy and sell futures
contracts only on exchanges where there appears to be an active secondary
market, there is no assurance that a liquid secondary market will exist for any
particular future at any particular time. In such event, it may not be possible
to close a futures contract position. Similar market liquidity risks occur with
respect to options.
The use of futures contracts and options thereon to attempt to protect
against the market risk of a decline in the value of portfolio securities is
referred to as having a "short futures position." The use of futures contracts
and options thereon to attempt to protect against the market risk that a fund
might not be fully invested at a time when the value of the securities in which
it invests is increasing is referred to as having a "long futures position." The
funds must operate within certain restrictions as to long and short positions in
futures contracts and options thereon under a rule (CFTC Rule) adopted by the
Commodity Futures Trading Commission under the Commodity Exchange Act to be
eligible for the exclusion provided by the CFTC Rule from registration by the
fund with the CFTC as a "commodity pool operator" (as defined under the CEA),
and must represent to the CFTC that it will operate within such restrictions.
Under these restrictions a fund will not, as to any positions, whether long,
short or a combination thereof, enter into futures contracts and options thereon
for which the aggregate initial margins and premiums exceed 5% of the fair
market value of the fund's assets after taking into account unrealized profits
and losses on options the fund has entered into; in the case of an option that
is "in-the-money" (as defined under the CEA), the in-the-money
10 American Century Investments
amount may be excluded in computing such 5%. (In general, a call option on a
futures contract is in-the-money if the value of the future exceeds the strike,
i.e., exercise, price of the call; a put option on a futures contract is
in-the-money if the value of the futures contract that is the subject of the put
is exceeded by the strike price of the put.) Under the restrictions, a fund also
must, as to short positions, use futures contracts and options thereon solely
for bona fide hedging purposes within the meaning and intent of the applicable
provisions under the CEA. As to its long positions that are used as part of a
fund's portfolio strategy and are incidental to the fund's activities in the
underlying cash market, the "underlying commodity value" (see below) of the
fund's futures contract and options thereon must not exceed the sum of (i) cash
set aside in an identifiable manner, or short-term U.S. debt obligations or
other U.S. dollar-denominated, high-quality, short-term money market instruments
so set aside, plus any funds deposited as margin; (ii) cash proceeds from
existing investments due in 30 days; and (iii) accrued profits held at the
futures commission merchant. [There are described above the segregated accounts
that a fund must maintain with its custodian bank as to its options and futures
contracts activities due to Securities and Exchange Commission requirements. The
fund will, as to its long positions, be required to abide by the more
restrictive of these SEC and CFTC requirements.] The underlying commodity value
of a futures contract is computed by multiplying the size (dollar amount) of the
futures contract by the daily settlement price of the futures contract. For an
option on a futures contract, that value is the underlying commodity value of
the future underlying the option.
Since futures contracts and options thereon can replicate movements in the
cash markets for the securities in which a fund invests without the large cash
investments required for dealing in such markets, they may subject a fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are (i) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (ii) possible lack of a liquid secondary market for closing out
futures or options positions; (iii) the need for additional portfolio management
skills and techniques; (iv) losses due to unanticipated market price movements;
and (v) the bankruptcy or failure of a futures commission merchant holding
margin deposits made by the funds and the funds' inability to obtain repayment
of all or part of such deposits. For a hedge to be completely effective, the
price change of the hedging instrument should equal the price change of the
security being hedged. Such equal price changes are not always possible because
the investment underlying the hedging instrument may not be the same investment
that is being hedged. The manager will attempt to create a closely correlated
hedge, but hedging activity may not be completely successful in eliminating
market value fluctuation. The ordinary spreads between prices in the cash and
futures markets, due to the differences in the natures of those markets, are
subject to the following factors which may create distortions. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the cash and futures markets.
Second, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced, thus producing distortion. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct forecast of general
interest trends by the manager may still not result in a successful transaction.
The manager may be incorrect in its expectations as to the extent of various
interest rate movements or the time span within which the movements take place.
The risk of imperfect correlation between movements in the price of a bond
index future and movements in the price of the securities that are the subject
of the hedge increases as the composition of a fund's portfolio diverges from
the securities included in the
Statement of Additional Information 11
applicable index. The price of the bond index future may move more than or less
than the price of the securities being hedged. If the price of the bond index
future moves less than the price of the securities that are the subject of the
hedge, the hedge will not be fully effective, but if the price of the securities
being hedged has moved in an unfavorable direction, the fund would be in a
better position than if it had not hedged at all. If the price of the securities
being hedged has moved in a favorable direction, this advantage will be
partially offset by the futures contract. If the price of the futures contract
moves more than the price of the security, a fund will experience either a loss
or a gain on the futures contract that will not be completely offset by
movements in the price of the securities that are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of the
securities being hedged and movements in the price of the bond index futures, a
fund may buy or sell bond index futures in a greater dollar amount than the
dollar amount of securities being hedged if the historical volatility of the
prices of such securities being hedged is less than the historical volatility of
the bond index. It is also possible that, where a fund has sold futures
contracts to hedge its securities against a decline in the market, the market
may advance and the value of securities held in the portfolio may decline. If
this occurred, a fund would lose money on the futures contract and also
experience a decline in value in its portfolio securities. However, while this
could occur for a brief period or to a very small degree, over time the value of
a portfolio of debt securities will tend to move in the same direction as the
market indexes upon which the futures contracts are based.
Where bond index futures are purchased to hedge against a possible increase
in the price of bonds before a fund is able to invest in securities in an
orderly fashion, it is possible that the market may decline instead; if the fund
then concludes not to invest in securities at that time because of concern as to
possible further market decline or for other reasons, it will realize a loss on
the futures contract that is not offset by a reduction in the price of the
securities it had anticipated purchasing.
The risks of investment in options on bond indexes may be greater than
options on securities. Because exercises of bond index options are settled in
cash, when a fund writes a call on a bond index it cannot provide in advance for
its potential settlement obligations by acquiring and holding the underlying
securities. A fund can offset some of the risk of its writing position by
holding a portfolio of bonds similar to those on which the underlying index is
based. However, a fund cannot, as a practical matter, acquire and hold a
portfolio containing exactly the same securities as the underlying index and, as
a result, bears a risk that the value of the securities held will vary from the
value of the index. Even if a fund could assemble a portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, a fund, as the call writer, will not
learn that it has been assigned until the next business day at the earliest. The
time lag between exercise and notice of assignment poses no risk for the writer
of a covered call on a specific underlying security because there, the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
securities that exactly match the composition of the underlying index, it will
not be able to satisfy its assignment obligations by delivering those securities
against payment of the exercise price. Instead, it will be required to pay cash
in an amount based on the closing index value of the exercise date; and by the
time it learns that it has been assigned, the index may have declined with a
corresponding decline in the value of its portfolio. This "timing risk" is an
inherent limitation on the ability of index call writers to cover their risk
exposure by holding securities positions.
If a fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying
12 American Century Investments
index may subsequently change. If such a change causes the exercised option to
fall out-of-the-money, the fund exercising the option must pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
MUNICIPAL LEASES
The tax-exempt funds may invest in municipal lease obligations and
certificates of participation in such obligations (collectively, lease
obligations). A lease obligation does not constitute a general obligation of the
municipality for which the municipality's taxing power is pledged, although the
lease obligation is ordinarily backed by the municipality's covenant to budget
for the payments due under the lease obligation.
Certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease obligation payments in
future years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove
difficult. In evaluating a potential investment in such a lease obligation,
management will consider: (i) the credit quality of the obligor, (ii) whether
the underlying property is essential to a governmental function, and (iii)
whether the lease obligation contains covenants prohibiting the obligor from
substituting similar property if the obligor fails to make appropriations for
the lease obligation.
Municipal lease obligations may be determined to be liquid in accordance
with the guidelines established by the funds' board of directors for purposes of
complying with the funds' investment restrictions. In determining the liquidity
of a lease obligation, the manager will consider: (1) the frequency of trades
and quotes for the lease obligation, (2) the number of dealers willing to
purchase or sell the lease obligation and the number of other potential
purchasers, (3) dealer undertakings to make a market in the lease obligation,
(4) the nature of the marketplace trades, including the time needed to dispose
of the lease obligation, the method of soliciting offers, and the mechanics of
transfer, (5) whether the lease obligation is of a size that will be attractive
to institutional investors, (6) whether the lease obligation contains a
non-appropriation clause and the likelihood that the obligor will fail to make
an appropriation therefore, and (7) such other factors as the manager may
determine to be relevant to such determination.
OFFICERS AND DIRECTORS
The principal officers and directors of the corporation, their principal
business experience during the past five years, and their affiliations with the
fund's investment manager, American Century Investment Management, Inc. and its
transfer agent, American Century Services Corporation, are listed below. Unless
otherwise noted, the business address of each director and officer is American
Century Tower, 4500 Main Street, Kansas City, Missouri 64111. All persons named
as officers of the Corporation also serve in similar capacities for other funds
advised by the manager. Those directors that are "interested persons" as defined
in the Investment Company Act of 1940 are indicated by an asterisk(*).
JAMES E. STOWERS JR.,* Chairman of the Board and Director; Chairman of the
Board, Director and controlling shareholder of American Century Companies, Inc.,
parent corporation of American Century Investment Management, Inc. and American
Century Services Corporation; Chairman of the Board and Director of American
Century Investment Management, Inc. and American Century Services Corporation;
father of James E. Stowers III.
JAMES E. STOWERS III,* President, Chief Executive Officer and Director;
President, Chief Executive Officer and Director, American Century Companies,
Inc., American Century Investment Management, Inc. and American Century Services
Corporation.
THOMAS A. BROWN, Director; 2029 Wyandotte, Kansas City, Missouri; Chief
Executive Officer, Associated Bearing Company, a corporation engaged in the sale
of bearings and power transmission products.
ROBERT W. DOERING, M.D., Director; 6420 Prospect, Kansas City, Missouri;
general surgeon.
D. D. (DEL) HOCK, Director; 1225 Seventeenth Street #900, Denver, Colorado;
Chairman, President and Chief Executive Officer, Public Service Company of
Colorado.
Statement of Additional Information 13
LINSLEY L. LUNDGAARD, Vice Chairman of the Board and Director; 18648 White
Wing Drive, Rio Verde, Arizona; retired; formerly Vice President and National
Sales Manager, Flour Milling Division, Cargill, Inc.
DONALD H. PRATT, Director; P.O. Box 419917, Kansas City, Missouri;
President, Butler Manufacturing Company.
LLOYD T. SILVER JR., Director; 2300 West 70th Terrace, Mission Hills,
Kansas; President, LSC, Inc., manufacturer's representative.
M. JEANNINE STRANDJORD, Director; 908 West 121st Street, Kansas City,
Missouri; Senior Vice President and Treasurer, Sprint Corporation.
WILLIAM M. LYONS, Executive Vice President, Chief Operating Officer,
Secretary and General Counsel; Executive Vice President, Chief Operating Officer
and General Counsel, American Century Companies, Inc., American Century
Investment Management, Inc. and American Century Services Corporation.
ROBERT T. JACKSON, Executive Vice President and Principal Financial
Officer; Executive Vice President and Treasurer, American Century Companies,
Inc., American Century Investment Management, Inc. and American Century Services
Corporation; formerly Executive Vice President, Kemper Corporation.
MARYANNE ROEPKE, CPA, Vice President, Treasurer and Principal Accounting
Officer; Vice President, American Century Services Corporation.
PATRICK A. LOOBY, Vice President; Vice President, American Century Services
Corporation.
MERELE A. MAY, Controller.
C. JEAN WADE, CPA, Controller; formerly, accountant, Baird, Kurtz & Dobson.
The Board of Directors has established four standing committees, the
Executive Committee, the Audit Committee, the Compliance Committee and the
Nominating Committee.
Messrs. Stowers Jr., Stowers III, and Lundgaard constitute the Executive
Committee of the Board of Directors. The committee performs the functions of the
Board of Directors between meetings of the Board, subject to the limitations on
its power set out in the Maryland General Corporation Law, and except for
matters required by the Investment Company Act to be acted upon by the whole
Board.
Messrs. Lundgaard (chairman), Doering and Hock and Ms. Strandjord
constitute the Audit Committee. The functions of the Audit Committee include
recommending the engagement of the funds' independent accountants, reviewing the
arrangements for and scope of the annual audit, reviewing comments made by the
independent accountants with respect to internal controls and the considerations
given or the corrective action taken by management, and reviewing nonaudit
services provided by the independent accountants.
Messrs. Brown (chairman), Pratt and Silver constitute the Compliance
Committee. The functions of the Compliance Committee include reviewing the
results of the funds' compliance testing program, reviewing quarterly reports
from the manager to the Board regarding various compliance matters and
monitoring the implementation of the funds' Code of Ethics, including violations
thereof.
The Nominating Committee has as its principal role the consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the Board, management and shareholders. This
committee also reviews and makes recommendations to the Board with respect to
the composition of Board committees and other Board-related matters, including
its organization, size, composition, responsibilities, functions and
compensation. The members of the nominating committee are Messrs. Pratt
(Chairman), Lundgaard and Stowers III.
The Directors of the corporation also serve as Directors for other funds
advised by the manager. Each Director who is not an "interested person" as
defined in the Investment Company Act receives for service as a member of the
Board of all Twentieth Century investment companies an annual director's fee of
$44,000, and an additional fee of $1,000 per regular Board meeting attended and
$500 per special Board meeting and committee meeting attended. In addition,
those Directors who are not "interested persons" and serve as chairman of a
committee of the Board of Directors receive an additional $2,000 for such
services. These fees and expenses are divided among the six investment companies
based upon their relative net assets. Under the terms of the management
agreement with the manager, the funds are responsible for paying such fees and
expenses. Set
14 American Century Investments
forth below is the aggregate compensation paid for the periods indicated by the
funds and by the American Century family of funds as a whole to each Director
who is not an "interested person" as defined in the Investment Company Act.
Aggregate Total Compensation from
Compensation the American Century
Director from the corporation 1 Family of Funds 2
- ------------------------------------------------------------------------
Thomas A. Brown 40,880.74 45,000
Robert W. Doering, M.D. 38,046.00 41,500
Linsley L. Lundgaard 41,179.13 45,000
Donald H. Pratt 39,388.80 43,333
Lloyd T. Silver Jr. 39,388.80 43,000
M. Jeannine Strandjord 39,388.80 42,500
John M. Urie 3 41,179.13 37,167
Del Hock 3 0 7,500
- ------------------------------------------------------------------------
1 Includes compensation actually paid by the corporation during the fiscal year
ended October 31, 1996.
2 Includes compensation paid by the fifteen investment company members of the
American Century family of funds for the calendar year ended December 31, 1996.
3 Del Hock replaced Jack Urie as an independent director effective October 31,
1996.
The corporation has adopted the American Century Mutual Funds Deferred
Compensation Plan for Non-Interested Directors. Under the Plan, the
non-interested person Directors may defer receipt of all or any part of the fees
to be paid to them for serving as Directors of the corporation.
Under the Plan, all deferred fees are credited to an account established in
the name of the participating Directors. The amounts credited to the account
then increase or decrease, as the case may be, in accordance with the
performance of one or more of the American Century funds that are selected by
the participating Director. The account balance continues to fluctuate in
accordance with the performance of the selected fund or funds until final
payment of all amounts credited to the account. Directors are allowed to change
their designation of mutual funds from time to time.
No deferred fees are payable until such time as a participating Director
resigns, retires or otherwise ceases to be a member of the Board of Directors.
Directors may receive deferred fee account balances either in a lump sum payment
or in substantially equal installment payments to be made over a period not to
exceed 10 years. Upon the death of a Director, all remaining deferred fee
account balances are paid to the Director's beneficiary or, if none, to the
Director's estate.
The Plan is an unfunded plan and, accordingly, American Century has no
obligation to segregate assets to secure or fund the deferred fees. The rights
of Directors to receive their deferred fee account balances are the same as the
rights of a general unsecured creditor of the corporation. The Plan may be
terminated at any time by the administrative committee of the Plan. If
terminated, all deferred fee account balances will be paid in a lump sum.
No deferred fees were paid to any participating Directors under the Plan
during the fiscal year ended October 31, 1995.
Those Directors who are "interested persons," as defined in the Investment
Company Act, receive no fee as such for serving as a Director. The salaries of
such individuals, who are also officers of the funds, are paid by the manager.
MANAGEMENT
A description of the responsibilities and method of compensation of the
funds' investment manager, American Century Investment Management, Inc., appears
in each prospectus under the caption, "Management."
During the past three years, the management fees of the manager were:
FUND Years Ended October 31,
- ------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------
SELECT
Management fees $ 39,305,054 $ 40,918,896 $ 46,147,911
Average net assets 3,935,124,830 4,100,172,070 4,616,441,587
HERITAGE
Management fees 10,572,605 8,900,956 8,238,322
Average net assets 1,065,351,654 899,947,177 822,480,118
GROWTH
Management fees 47,632,557 45,713,727 43,916,916
Average net assets 4,789,339,586 4,575,064,437 4,404,299,518
ULTRA
Management fees 162,207,777 113,284,379 91,474,921
Average net asset 16,286,747,712 11,330,063,925 9,149,558,371
VISTA
Management fees 20,199,050 11,104,694 7,226,302
Average net assets 2,041,214,251 1,123,979,069 732,311,586
GIFTRUST
Management fees 7,161,935 3,840,425 1,875,098
Average net assets 731,222,156 389,827,724 189,487,155
Statement of Additional Information 15
FUND Years Ended October 31,
- ------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------
BALANCED
Management fees $ 8,345,585 $ 7,303,148 $ 6,861,248
Average net assets 844,937,283 743,379,550 687,079,027
CASH RESERVE
Management fees 9,593,595 9,546,843 10,282,495
Average net assets 1,375,448,677 1,367,481,447 1,294,838,404
SHORT-TERM GOVERNMENT FUND
Management fees 2,570,178 2,708,850 3,611,805
Average net assets 370,206,942 387,845,926 447,658,784
INTERMEDIATE-TERM
GOVERNMENT FUND
Management fees 179,763 104,141 19,566
Average net assets 24,215,896 14,092,947 3,821,083
LIMITED-TERM
TAX-EXEMPT
Management fees 205,918(1) 0 0
Average net assets 53,836,145 59,645,970 57,545,359
INTERMEDIATE-TERM
TAX-EXEMPT
Management fees 484,914 471,159 537,893
Average net assets 81,296,908 78,781,379 89,751,385
LONG-TERM TAX-EXEMPT
Management fees 352,945 317,622 361,732
Average net assets 59,479,341 53,244,618 60,383,665
LIMITED-TERM BOND
Management fees 52,116 40,530 17,509
Average net assets 7,680,716 5,906,790 3,690,814
INTERMEDIATE-TERM BOND
Management fees 108,870 59,552 17,532
Average net assets 14,807,295 8,128,357 3,458,399
BENHAM BOND
Management fees 1,148,428 1,038,120 1,233,251
Average net assets 146,071,676 132,239,065 141,750,838
- ------------------------------------------------------------------------
1 Net of fees waived by the manager.
The Advisor Class of Ultra and Vista commenced operations on October 2, 1996.
The management fees shown above include $7,146 paid on Advisor Class shares of
Ultra and $3,127 paid on Advisor Class shares of Vista for the 29 day period
ended October 31, 1996.
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution, or until the first
meeting of shareholders following such execution, and for as long thereafter as
its continuance is specifically approved at least annually by (i) the funds'
Board of Directors, or by the vote of a majority of the outstanding votes (as
defined in the Investment Company Act), and (ii) by the vote of a majority of
the Directors of the funds who are not parties to the agreement or interested
persons of the manager, cast in person at a meeting called for the purpose of
voting on such approval.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the funds' Board of Directors, or by a vote of
a majority of the funds' shareholders, on 60 days' written notice to the
manager, and that it shall be automatically terminated if it is assigned.
The management agreement provides that the manager shall not be liable to
the funds or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties.
The management agreement also provides that the manager and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for one or more funds and also for
other clients advised by the manager. Investment decisions for the funds and
other clients are made with a view to achieving their respective investment
objectives after consideration of such factors as their current holdings,
availability of cash for investment, and the size of their investment generally.
A particular security may be bought or sold for only one client or series, or in
different amounts and at different times for more than one but less than all
clients or series. In addition, purchases or sales of the same security may be
made for two or more clients or series on the same date. Such transactions will
be allocated among clients or series in a manner believed by the manager to be
equitable to each. In some cases this procedure could have an adverse effect on
the price or amount of the securities purchased or sold by a fund.
The manager may aggregate purchase and sale orders of the funds with
purchase and sale orders of its other clients when the manager believes that
such aggregation provides the best execution for the funds. The funds' Board of
Directors has approved the policy of the manager with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the funds participate at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
manager will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the
16 American Century Investments
management agreement. The manager receives no additional compensation or
remuneration as a result of such aggregation.
On January 31, 1997, the manager was acting as an investment advisor to 12
institutional accounts with an aggregate value of $498,426,343. While each of
these clients has unique investment restrictions and guidelines, some have all
elected to have their portfolios managed in a manner similar to the portfolio of
either Growth or Select. Accordingly, anytime a security is being bought or sold
for the Growth or Select funds, it may also be bought or sold for some or all of
such institutional accounts. The manager anticipates acquiring additional such
accounts in the future.
American Century Services Corporation provides physical facilities,
including computer hardware and software and personnel, for the day-to-day
administration of the funds and of the manager. The manager pays American
Century Services Corporation for such services. The payments by the manager to
American Century Services Corporation for the years ending October 31, 1996,
1995 and 1994 have been, respectively, $118,664,664, $100,504,910 and
$139,895,701.
As stated in each prospectus, all of the stock of American Century Services
Corporation and American Century Investment Management, Inc. is owned by
American Century Companies, Inc.
CUSTODIANS
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York
10003-9598, Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, and
United Missouri Bank of Kansas City, N.A., 10th and Grand, Kansas City, Missouri
64105, each serves as custodian of the assets of the funds. The custodians take
no part in determining the investment policies of the funds or in deciding which
securities are purchased or sold by the funds. The funds, however, may invest in
certain obligations of the custodians and may purchase or sell certain
securities from or to the custodians.
INDEPENDENT ACCOUNTANTS
Beginning with the 1997 fiscal year, Delloitte and Touche LLP, 1010 Grand
Avenue, Kansas City, Missouri 64106, has been selected to serve as the fund's
independent accountants, providing services including (1) audit of the annual
financial statements, (2) assistance and consultation in connection with SEC
filings and (3) review of the annual federal income tax return filed for each
fund.
CAPITAL STOCK
The funds' capital stock is described in the prospectuses under the
caption, "Further Information About American Century."
American Century may in the future issue additional series or class of
shares without a vote of shareholders. The assets belonging to each series or
classes of shares are held separately by the custodian and the shares of each
series or class represent a beneficial interest in the principal, earnings and
profit (or losses) of investments and other assets held for each series or
class. Your rights as a shareholder are the same for all series or class of
securities unless otherwise stated. Within their respective series or class, all
shares have equal redemption rights. Each share, when issued, is fully-paid and
non-assessable. Each share, irrespective of series or class, is entitled to one
vote for each dollar of net asset value represented by such share on all
questions.
In the event of complete liquidation or dissolution of American Century,
shareholders of each series or class of shares shall be entitled to receive, pro
rata, all of the assets less the liabilities of that series or class.
As of January 31, 1997, in excess of 5% of the outstanding shares of the
following funds were owned of record by:
NAME OF SHAREHOLDER
FUND AND PERCENTAGE
- ------------------------------------------------------------------------
Growth Nationwide Life Insurance Company
Columbus, Ohio -- 13.0%
Ultra Charles Schwab & Co.
San Francisco, California -- 8.7%
Vista Charles Schwab & Co. -- 6.9%
Heritage Charles Schwab & Co. -- 6.2%
Bankers Trust Company as trustee for Kraft
General Foods -- 11.3%
Limited-Term
Tax-Exempt Twentieth Century Companies, Inc.-- 14.5%
Long-Term
Tax-Exempt Twentieth Century Companies, Inc. -- 6.7%
Limited-Term Bond Twentieth Century Companies, Inc. -- 38.3%
Statement of Additional Information 17
NAME OF SHAREHOLDER
FUND AND PERCENTAGE
- --------------------------------------------------------------------------------
Intermediate-Term
Bond Twentieth Century Companies, Inc.-- 17.6%
The Chase Manhattan Bank as Trustee for
Gza Geo Environmental Inc. Restated
401(k) Profit Sharing Plan and Trust
New York, New York -- 6.8%
The Chase Manhattan Bank as trustee for
Fujisawa USA Inc. Savings and Retirement
Plan Trust New York, New York-- 5.2%
Short-Term
Government Fund Nationwide Life Insurance Company -- 10.2%
Intermediate-Term
Government Fund The Chase Manhattan Bank as Trustee for
Robert Bosch Corporation Star Plan and
Trust New York, New York -- 14.1%
New Opportunities Trustees of Twentieth Century Profit
Sharing and 401(k) Savings Distribution
Reinvested Plan and Trust -- 6.2%
- --------------------------------------------------------------------------------
MULTIPLE CLASS STRUCTURE
The funds' Board of Directors has adopted a multiple class plan (the
"Multiclass Plan") pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such
plan, the funds may issue up to four classes of funds: an Investor Class, an
Institutional Class, a Service Class and an Advisor Class. Not all funds offer
all four classes.
The Investor Class is made available to investors directly by the
investment manager through its affiliated broker-dealer, American Century
Investment Services, Inc., for a single unified management fee, without any load
or commission. The Institutional, Service and Advisor Classes are made available
to institutional shareholders or through financial intermediaries that do not
require the same level of shareholder and administrative services from the
manager as Investor Class shareholders. As a result, the manager is able to
charge these classes a lower management fee. In addition to the management fee,
however, Service Class shares are subject to a Shareholder Services Plan
(described below), and the Advisor Class shares are subject to a Master
Distribution and Shareholder Services Plan (also described below). Both plans
have been adopted by the funds' board of directors and initial shareholder in
accordance with Rule 12b-1 adopted by the SEC under the 1940 Act.
RULE 12-B1
Rule 12b-1 permits an investment company to pay expenses associated with
the distribution of its shares in accordance with a plan adopted by the
investment company's Board of Directors and approved by its shareholders.
Pursuant to such rule, the Board of Directors and initial shareholder of the
funds' Service Class and Advisor Class have approved and entered into a
Shareholder Services Plan, with respect to the Service Class, and a Master
Distribution and Shareholder Services Plan, with respect to the Advisor Class
(collectively, the "Plans"). Both Plans are described below.
In adopting the Plans, the Board of Directors (including a majority of
directors who are not "interested persons" of the funds (as defined in the 1940
Act), hereafter referred to as the "independent directors") determined that
there was a reasonable likelihood that the Plans would benefit the funds and the
shareholders of the affected classes. Pursuant to Rule 12b-1, information with
respect to revenues and expenses under the Plans is presented to the Board of
Directors quarterly for its consideration in connection with its deliberations
as to the continuance of the Plans. Continuance of the Plans must be approved by
the Board of Directors (including a majority of the independent directors)
annually. The Plans may be amended by a vote of the Board of Directors
(including a majority of the independent directors), except that the Plans may
not be amended to materially increase the amount to be spent for distribution
without majority approval of the shareholders of the affected class. The Plans
terminate automatically in the event of an assignment and may be terminated upon
a vote of a majority of the independent directors or by vote of a majority of
the outstanding voting securities of the affected class.
All fees paid under the plans will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers.
SHAREHOLDER SERVICES PLAN
As described in the Prospectuses, the funds' Service Class of shares are
made available to participants in employer-sponsored retirement or savings plans
and to persons purchasing through financial
18 American Century Investments
intermediaries, such as banks, broker-dealers and insurance companies. In such
circumstances, certain recordkeeping and administrative services that are
provided by the funds' transfer agent for the Investor Class shareholders may be
performed by a plan sponsor (or its agents) or by a financial intermediary. To
enable the funds' shares to be made available through such plans and financial
intermediaries, and to compensate them for such services, the funds' investment
manager has reduced its management fee by 0.25% per annum with respect to the
Service Class shares and the funds' Board of Directors has adopted a Shareholder
Services Plan. Pursuant to the Shareholder Services Plan, the Service Class
shares pay a shareholder services fee of 0.25% annually of the aggregate average
daily assets of the funds' Service Class shares.
American Century Investment Services, Inc. (the "Distributor") enters into
contracts with each financial intermediary for the provision of certain
shareholder services and utilizes the shareholder services fees received under
the Shareholder Services Plan to pay for such services. Payments may be made for
a variety of shareholder services, including, but are not limited to, (a)
receiving, aggregating and processing purchase, exchange and redemption request
from beneficial owners (including contract owners of insurance products that
utilize the funds as underlying investment media) of shares and placing
purchase, exchange and redemption orders with the Distributor; (b) providing
shareholders with a service that invests the assets of their accounts in shares
pursuant to specific or pre-authorized instructions; (c) processing dividend
payments from a fund on behalf of shareholders and assisting shareholders in
changing dividend options, account designations and addresses; (d) providing and
maintaining elective services such as check writing and wire transfer services;
(e) acting as shareholder of record and nominee for beneficial owners; (f)
maintaining account records for shareholders and/or other beneficial owners; (g)
issuing confirmations of transactions; (h) providing subaccounting with respect
to shares beneficially owned by customers of third parties or providing the
information to a fund as necessary for such subaccounting; (i) preparing and
forwarding shareholder communications from the funds (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to shareholders and/or other beneficial owners;
(j) providing other similar administrative and sub-transfer agency services; and
(k) paying "service fees" for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD
(collectively referred to as "Shareholder Services"). Shareholder Services do
not include those activities and expenses that are primarily intended to result
in the sale of additional shares of the funds.
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectuses, the funds' Advisor Class of shares are
also made available to participants in employer-sponsored retirement or savings
plans and to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. The Distributor enters into contracts
with various banks, broker-dealers, insurance companies and other financial
intermediaries with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.
As with the Service Class, certain recordkeeping and aministrative services
that are provided by the funds' transfer agent for the Investor Class
shareholders may be performed by a plan sponsor (or its agents) or by a
financial intermediary for shareholders in the Advisor Class. In addition to
such services, the financial intermediaries provide various distribution
services.
To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
investment manager has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares and the funds' Board of Directors has
adopted a Master Distribution and Shareholder Services Plan (the "Distribution
Plan"). Pursuant to such Plan, the Advisor Class shares pay the Distributor a
fee of 0.50% annually of the aggregate average daily assets of the funds'
Advisor Class shares, 0.25% of which is paid for Shareholder Services (as
described above) and 0.25% of which is paid for distribution services.
Distribution services include any activity undertaken or expense incurred
that is primarily intended
Statement of Additional Information 19
to result in the sale of Advisor Class shares, which services may include but
are not limited to, (a) the payment of sales commission, ongoing commissions and
other payments to brokers, dealers, financial institutions or others who sell
Advisor Class shares pursuant to Selling Agreements; (b) compensation to
registered representatives or other employees of Distributor who engage in or
support distribution of the funds' Advisor Class shares; (c) compensation to,
and expenses (including overhead and telephone expenses) of, Distributor; (d)
the printing of prospectuses, statements of additional information and reports
for other than existing shareholders; (e) the preparation, printing and
distribution of sales literature and advertising materials provided to the
funds' shareholders and prospective shareholders; (f) receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information, and shareholder reports; (g)
the providing of facilities to answer questions from prospective investors about
fund shares; (h) complying with federal and state securities laws pertaining to
the sale of fund shares; (i) assisting investors in completing application forms
and selecting dividend and other account options; (j) the providing of other
reasonable assistance in connection with the distribution of fund shares; (k)
the organizing and conducting of sales seminars and payments in the form of
transactional compensation or promotional incentives; (l) profit on the
foregoing; (m) the payment of "service fees" for the provision of personal,
continuing services to investors, as contemplated by the Rules of Fair Practice
of the NASD and (n) such other distribution and services activities as the
manager determines may be paid for by the funds pursuant to the terms of this
Agreement and in accordance with Rule 12b-1 of the 1940 Act.
BROKERAGE
SELECT, HERITAGE, GROWTH, ULTRA, VISTA, GIFTRUST
AND THE EQUITY INVESTMENTS OF BALANCED
Under the management agreement between the funds and the manager, the
manager has the responsibility of selecting brokers to execute portfolio
transactions. The funds' policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. So long as that policy is
met, the manager may take into consideration the factors discussed under this
caption when selecting brokers.
The manager receives statistical and other information and services without
cost from brokers and dealers. The manager evaluates such information and
services, together with all other information that it may have, in supervising
and managing the investment portfolios of the funds. Because such information
and services may vary in amount, quality and reliability, their influence in
selecting brokers varies from none to very substantial. The manager proposes to
continue to place some of the funds' brokerage business with one or more brokers
who provide information and services. Such information and services will be in
addition to and not in lieu of services required to be performed by the manager.
The manager does not utilize brokers that provide such information and services
for the purpose of reducing the expense of providing required services to the
funds.
In the years ended October 31, 1996, 1995 and 1994, the brokerage
commissions of each fund were as follows:
Years Ended October 31,
- ------------------------------------------------------------------------
Fund 1996 1995 1994
- ------------------------------------------------------------------------
SELECT $8,157,658 $11,363,976 $14,844,437
HERITAGE 3,093,265 3,180,082 3,620,144
GROWTH 10,712,208 13,577,767 10,144,618
ULTRA 22,985,927 18,911,590 19,240,703
VISTA 2,246,175 1,750,665 1,895,400
GIFTRUST 886,460 571,349 588,145
BALANCED 1,038,530 875,207 979,903
- ------------------------------------------------------------------------
In 1996, $49,120,223 of the total brokerage commissions was paid to brokers
and dealers who provided information and services on transactions of
$56,023,070,599 (92% of all transactions).
The brokerage commissions paid by the funds may exceed those which another
broker might have charged for effecting the same transactions, because of the
value of the brokerage and research services provided by the broker. Research
services furnished by brokers through whom the funds effect securities
transactions may be used by the manager in servicing all of its accounts, and
not all such services may be used by the manager in managing the portfolios of
the funds.
20 American Century Investments
The staff of the SEC has expressed the view that the best price and
execution of over-the-counter transactions in portfolio securities may be
secured by dealing directly with principal market makers, thereby avoiding the
payment of compensation to another broker. In certain situations, the officers
of the funds and the manager believe that the facilities, expert personnel and
technological systems of a broker often enable the funds to secure as good a net
price by dealing with a broker instead of a principal market maker, even after
payment of the compensation to the broker. The funds regularly place its
over-the-counter transactions with principal market makers, but may also deal on
a brokerage basis when utilizing electronic trading networks or as circumstances
warrant.
CASH RESERVE, SHORT-TERM GOVERNMENT FUND, INTERMEDIATE-TERM GOVERNMENT FUND,
LIMITED-TERM BOND, INTERMEDIATE-TERM BOND, BENHAM BOND, LIMITED-TERM TAX-EXEMPT,
INTERMEDIATE-TERM TAX-EXEMPT, LONG-TERM TAX-EXEMPT AND THE FIXED INCOME
INVESTMENTS OF BALANCED
Under the management agreement between the funds and the manager, the
manager has the responsibility of selecting brokers and dealers to execute
portfolio transactions. In many transactions, the selection of the broker or
dealer is determined by the availability of the desired security and its
offering price. In other transactions, the selection of broker or dealer is a
function of the selection of market and the negotiation of price, as well as the
broker's general execution and operational and financial capabilities in the
type of transaction involved. The manager will seek to obtain prompt execution
of orders at the most favorable prices or yields. The manager may choose to
purchase and sell portfolio securities to and from dealers who provide services
or research, statistical and other information to the funds and to the manager.
Such information or services will be in addition to and not in lieu of the
services required to be performed by the manager, and the expenses of the
manager will not necessarily be reduced as a result of the receipt of such
supplemental information.
PERFORMANCE ADVERTISING
Individual fund performance may be compared to various indices including
the Standard & Poor's 500 Index, the Dow Jones Industrial Average, Donoghue's
Money Fund Average and the Bank Rate Monitor National Index of 21/2-year CD
rates.
EQUITY FUNDS
The following table sets forth the average annual total return of the
equity funds and Balanced for the one-, five- and 10-year periods (or period
since inception) ended October 31, 1996, the last day of the funds' fiscal year.
Average annual total return is calculated by determining each fund's cumulative
total return for the stated period and then computing the annual compound return
that would produce the cumulative total return if the fund's performance had
been constant over that period. Cumulative total return includes all elements of
return, including reinvestment of dividends and capital gains distributions.
From
Fund 1 year 5 year 10 year Inception (1)
- ------------------------------------------------------------------------
SELECT 19.76% 9.67% 11.27% --
HERITAGE 10.44% 13.27% -- 15.57%
GROWTH 8.18% 9.32% 13.56% --
ULTRA 10.79% 15.62% 19.92% --
VISTA 6.96% 14.61% 14.67% --
GIFTRUST 9.72% 24.31% 21.71% --
BALANCED 14.04% 8.50% -- 12.21%
- ------------------------------------------------------------------------
1 Data from inception shown for funds that are less than 10 years old.
The funds may also advertise average annual total return over periods of
time other than one, five and 10 years and cumulative total return over various
time periods.
The following table shows the cumulative total return of the equity funds
and Balanced since their respective dates of inception. The table also shows
annual compound rates for Growth and Select from June 30, 1971, which
corresponds with the funds' implementation of its current investment philosophy
and practices and for all other funds from their respective dates of inception
(as noted previously) through October 31, 1996.
Statement of Additional Information 21
Cumulative Total Average Annual
Fund Return Since Inception Compound Rate
- ------------------------------------------------------------------------
SELECT 4776.98% 16.58%
HERITAGE 266.32% 15.57%
GROWTH 6728.19% 18.14%
ULTRA 1051.37% 17.70%
VISTA 442.07% 13.96%
GIFTRUST 1109.27% 21.26%
BALANCED 152.24% 12.21%
- ------------------------------------------------------------------------
FIXED INCOME FUNDS AND BALANCED
Cash Reserve. The yield of Cash Reserve is calculated by measuring the
income generated by an investment in the fund over a seven-day period (net of
fund expenses). This income is then "annualized." That is, the amount of income
generated by the investment over the seven-day period is assumed to be generated
over each similar period throughout a full year and is shown as a percentage of
the investment. The "effective yield" is calculated in a similar manner but,
when annualized, the income earned by the investment is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of the assumed reinvestment.
Based upon these methods of computation, the yield and effective yield for
Cash Reserve for the seven days ended October 31, 1996, the last seven days of
the fund's fiscal year, was 4.74% and 4.85%, respectively.
Other Fixed Income Funds and Balanced. Yield is calculated by adding over a
30-day (or one-month) period all interest and dividend income (net of fund
expenses) calculated on each day's market values, dividing this sum by the
average number of fund shares outstanding during the period, and expressing the
result as a percentage of the fund's share price on the last day of the 30-day
(or one-month) period. The percentage is then annualized. Capital gains and
losses are not included in the calculation.
The following table sets forth yield quotations for the fixed income funds
(other than Cash Reserve) and Balanced for the 30-day period ended October 31,
1996, the last day of the fiscal year pursuant to computation methods prescribed
by the SEC.
Intermediate-
Short-Term Intermediate-Term Limited-Term Term
Government Fund GovernmentFund Bond Bond
- ------------------------------------------------------------------------
5.36% 5.68% 5.55% 6.31%
- ------------------------------------------------------------------------
Intermediate-
Benham Limited-Term Term Long-Term Balanced
Bond Tax-Exempt Tax-Exempt Tax-Exempt
- ------------------------------------------------------------------------
6.30% 3.69% 4.34% 4.80% 2.29%
- ------------------------------------------------------------------------
The following table sets forth tax-equivalent yields for the Limited-Term
Tax-Exempt, Intermediate-Term Tax-Exempt and the Long-Term Tax-Exempt funds for
the 30-day period ended October 31, 1996. The example assumes a 36% tax rate.
The tax-equivalent yield is computed as follows:
tax-
equivalent = tax-exempt yield + non tax-exempt yield
yield ------------------
1-assumed tax rate
Tax-Exempt Tax-Exempt Tax-Exempt
Short-Term Intermediate-Term Long-Term
- ----------------------------------------------------
5.77% 6.78% 7.50%
- ----------------------------------------------------
The fixed income funds may also elect to advertise cumulative total return
and average annual total return, computed as described above.
The table below shows the cumulative total return and the average annual
total return of the fixed income funds since their respective dates of inception
(as noted below) through October 31, 1996.
Cumulative
Total Return Average Annual Date of
FUND Since Inception Total Return Inception
- ------------------------------------------------------------------------
SHORT-TERM
GOVERNMENT FUND 167.78% 7.36% 12/15/82
INTERMEDIATE-TERM
GOVERNMENT FUND 15.01% 5.38% 3/1/94
LIMITED-TERM BOND 14.77% 5.30% 3/1/94
INTERMEDIATE-TERM BOND 16.74% 5.97% 3/1/94
BENHAM BOND 104.68% 7.69% 3/2/87
LIMITED-TERM
TAX-EXEMPT 16.40% 4.23% 3/1/93
INTERMEDIATE-TERM
TAX-EXEMPT 74.65% 5.94% 3/2/87
LONG-TERM TAX-EXEMPT 94.55% 7.13% 3/2/87
- ------------------------------------------------------------------------
22 American Century Investments
ADDITIONAL PERFORMANCE COMPARISONS
Investors may judge the performance of the funds by comparing their
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as the EAFE(R) Index and those prepared by Dow Jones &
Co., Inc., Standard & Poor's Corporation, Shearson Lehman Brothers, Inc. and The
Russell 2000 Index, and to data prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc. and the Consumer Price Index. Comparisons may also be made to
indices or data published in Money, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, Pensions and Investments, USA Today, and
other similar publications or services. In addition to performance information,
general information about the funds that appears in a publication such as those
mentioned above or in the Prospectus under the heading "Performance Advertising"
may be included in advertisements and in reports to shareholders.
PERMISSIBLE ADVERTISING INFORMATION
From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of
the funds; (5) descriptions of investment strategies for one or more of the
funds; (6) descriptions or comparisons of various savings and investment
products (including, but not limited to, qualified retirement plans and
individual stocks and bonds), which may or may not include the funds; (7)
comparisons of investment products (including the funds) with relevant market or
industry indices or other appropriate benchmarks; (8) discussions of fund
rankings or ratings by recognized rating organizations; and (9) testimonials
describing the experience of persons that have invested in one or more of the
funds. The funds may also include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results in such communications.
Such performance examples will be based on an express set of assumptions and are
not indicative of the performance of any of the funds.
REDEMPTIONS IN KIND
The funds' policy with regard to redemptions in excess of the lesser of one
half of 1% of a fund's assets or $250,000 from its equity funds and Balanced is
described in the applicable fund prospectus under the heading "Special
Requirements for Large Redemptions."
The funds have elected to be governed by Rule 18f-1 under the Investment
Company Act, pursuant to which the funds are obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of the fund
during any 90-day period for any one shareholder. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage costs in converting the
assets to cash. The method of valuing portfolio securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described in the Prospectus under the caption "How Share Price is
Determined," and such valuation will be made as of the same time the redemption
price is determined.
HOLIDAYS
The funds do not determine the net asset value of its shares on days when
the New York Stock Exchange is closed. Currently, the Exchange is closed on
Saturdays and Sundays, and on holidays, namely New Year's Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
FINANCIAL STATEMENTS
The financial statements of the various series of shares of American
Century (other than New Opportunities) for the fiscal year ended October 31,
1996, are included in the annual report to shareholders, which is incorporated
herein by reference. You may receive copies of the report without charge upon
request to American Century at the address and phone number shown on the cover
of this Statement of Additional Information.
Statement of Additional Information 23
The unaudited financial statements of Twentieth Century New Opportunities
for the period from December 26, 1996 (inception) to January 31, 1997 are
included in this Statement of Additional Information. While the financial
statements respecting such fund contained herein are unaudited, in the opinion
of the manager, all adjustments necessary for a fair presentation of the
financial position and the results of operation at January 31, 1997 and for the
period from December 26, 1996 (inception) to January 31, 1997, have been made.
The results of operations for the period indicated are not necessarily
indicative of the results for an entire year.
24 American Century Investments
STATEMENT OF ASSETS AND LIABILITIES
NEW
JANUARY 31, 1997 (Unaudited) OPPORTUNITIES
- --------------------------------------------------------------------------------
ASSETS
Investment securities,
at value (identified cost of $119,093,317)
(Note 3) ................................................ $119,847,813
Cash ....................................................... 5,029,586
Receivable for capital shares sold ......................... 124,235
Dividends and interest receivable .......................... 2,340
---------
125,003,974
----------
LIABILITIES
Payable for investments purchased .......................... 21,621,743
Accrued management fees (Note 2) ........................... 44,058
Other liabilities .......................................... 128
----------
21,665,929
----------
Net Assets Applicable to Outstanding Shares ................ $103,338,045
============
CAPITAL SHARES, $.01 PAR VALUE
Authorized ................................................. 100,000,000
===========
Outstanding ................................................ 20,840,529
===========
Net Asset Value Per Share .................................. $4.96
===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .................... $103,044,301
Undistributed net investment income ........................ 27,913
Accumulated undistributed net realized
(loss) from investment transactions ..................... (488,665)
Net unrealized appreciation on investments (Note 3) ........ 754,496
----------
$103,338,045
See Notes to Financial Statements
Statement of Additional Information 25
STATEMENT OF OPERATIONS
DECEMBER 26, 1996 (INCEPTION) NEW
THROUGH JANUARY 31, 1997 (Unaudited) OPPORTUNITIES
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Interest .............................................. $70,129
Dividends ............................................. 2,340
----------
72,469
----------
Expenses:
Management fees (Note 2) .............................. 44,428
Directors' fees and expenses .......................... 128
----------
44,556
----------
Net investment income ...................................... 27,913
----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 3)
Net realized (loss) ................................... (488,665)
Change in net unrealized appreciation ................. 754,496
----------
Net realized and unrealized gain on investments ............ 265,831
----------
Net Increase in Net Assets Resulting from Operations ....... $293,744
See Notes to Financial Statements
26 American Century Investments
STATEMENT OF CHANGES IN NET ASSETS
DECEMBER 26, 1996 (INCEPTION) NEW
THROUGH JANUARY 31, 1997 (Unaudited) OPPORTUNITIES
- --------------------------------------------------------------------------------
Increase in Net Assets
OPERATIONS
Net investment income ......................................... $ 27,913
Net realized (loss) on investments ............................ (488,665)
Change in net unrealized appreciation on investments .......... 754,496
-------------
Net increase in net assets resulting from operations 293,744
-------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold
103,105,758
Payments for shares redeemed .................................. (61,457)
-------------
Net increase in net assets
from capital share transactions ............................ 103,044,301
-------------
Net increase in net assets .................................... 103,338,045
NET ASSETS
Beginning of period ........................................... --
-------------
End of period ................................................. $ 103,338,045
-------------
-------------
Undistributed net investment income ........................... $ 27,913
-------------
-------------
TRANSACTIONS IN SHARES OF THE FUND
Sold
20,852,883
Redeemed ...................................................... (12,354)
-------------
Net increase .................................................. $ 20,840,529
See Notes to Financial Statements
Statement of Additional Information 27
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION -- American Century Mutual Funds, Inc. (the Corporation) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. Twentieth Century New Opportunities (the Fund) is
one of the seventeen series of funds issued by the Corporation. The Fund's
investment objective is capital growth. The Fund seeks to achieve its investment
objective by investing primarily in common stocks that are considered by
management to have better-than-average prospects for appreciation. The following
significant accounting policies, related to the Fund, are in accordance with
accounting policies generally accepted in the investment company industry.
SECURITY VALUATIONS -- Portfolio securities traded primarily on a principal
securities exchange are valued at the last reported sales price, or the mean of
the latest bid and asked prices where no last sales price is available.
Securities traded over-the-counter are valued at the mean of the latest bid and
asked prices or, in the case of certain foreign securities, at the last reported
sales price, depending on local convention or regulation. When valuations are
not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the
date purchased or sold. Net realized gains and losses are determined on the
identified cost basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Dividend income, less foreign taxes withheld (if any),
is recorded as of the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of discounts and premiums.
REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
institutions that the Fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The Fund requires that the securities purchased in a repurchase
transaction be transferred to the custodian in a manner sufficient to enable the
Fund to obtain those securities in the event of a default under the repurchase
agreement. ACIM monitors, on a daily basis, the value of the securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the Fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having management agreements with ACIM and Benham
Management Corporation, may transfer uninvested cash balances into a joint
trading account. These balances are invested in one or more repurchase
agreements that are collaterized by U.S. Treasury or Agency obligations.
INCOME TAX STATUS -- It is the policy of the Fund to distribute all taxable
income and capital 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 income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded
on the ex-dividend date. Distributions from net investment income and net
realized gains are declared and paid annually.
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 are primarily due to differences
in the recognition of income and expense items for financial statement and tax
purposes.
SUPPLEMENTARY INFORMATION -- Certain officers and directors of the
Corporation are also officers and/or directors, and, as a group, controlling
stockholders of American Century Companies, Inc., the parent of the
Corporation's investment manager, ACIM, the Corporation's distributor, American
Century Investment Services, Inc., and the Corporation's transfer agent,
American Century Services Corporation.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
28 American Century Investments
NOTES TO FINANCIAL STATEMENTS
2. TRANSACTIONS WITH RELATED PARTIES
The Corporation has entered into a Management Agreement with ACIM that
provides the Fund with investment advisory and management services in exchange
for a single, unified fee. The Agreement provides that all expenses of the Fund,
except brokerage commissions, taxes, interest, expenses of those directors who
are not considered "interested persons" as defined in the Investment Company Act
of 1940 (including counsel fees) and extraordinary expenses, will be paid by
ACIM. The fee is computed daily and paid monthly based on the Fund's average
daily closing net assets during the previous month. The annual management fee
for the Fund is 1.5%.
3. INVESTMENT TRANSACTIONS
The aggregate cost of investment securities purchased (excluding short-term
investments) for the period December 26, 1996 (inception) through January 31,
1997, totaled $90,556,978 for common stocks. Proceeds from investment securities
sold (excluding short-term investments) totaled $2,065,528 for common stocks. As
of January 31, 1997, accumulated net unrealized appreciation on investments was
$754,496, consisting of unrealized appreciation of $2,651,084 and unrealized
depreciation of $1,896,588. The aggregate cost of investments for federal income
tax purposes was the same as the cost for financial reporting purposes.
4. AFFILIATED COMPANY TRANSACTIONS
A summary of transactions for each issuer who is or was an affiliate at or
during the period December 26, 1996 (inception) through January 31, 1997,
follows:
JANUARY 31, 1997
--------------------------------
ISSUER PURCHASE SHARE MARKET
COST BALANCE VALUE
- ------------------------------------------------------------------------
Brightpoint, Inc. $ 2,238,278 80,300 $ 2,263,456
NBTY Inc. 1,687,018 82,400 1,761,300
Pomeroy Computer
Resources, Inc. 1,761,427 53,900 1,677,638
Rational Software Corp. 3,269,444 113,200 2,851,225
Teledata Communication
Ltd. 1,715,977 64,500 1,685,063
- ------------------------------------------------------------------------
$10,672,144 $10,238,682
- ------------------------------------------------------------------------
Statement of Additional Information 29
P.O. Box 419200
Kansas City, Missouri
64141-6200
Person-to-person assistance:
1-800-345-2021 or 816-531-5575
Automated Information Line:
1-800-345-8765
Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865
Fax: 816-340-7962
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9702 [recycled logo]
SH-BKT-7971 Recycled
<PAGE>
PART C. OTHER INFORMATION.
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
(i) Financial Statements filed in Part A of the Registration Statement:
1. Financial Highlights.
(ii) Financial Statements filed in Part B of the Registration Statement
(each of the following financial statements is contained in the
Registrant's Annual Reports dated October 31, 1996, and which are
incorporated by reference into Part B of this Registration
Statement):
1. Statement of Assets and Liabilities at October 31, 1996.
2. Statement of Operations for the year ended October 31, 1996.
3. Statement of Changes in Net Assets for the year ended October
31, 1996.
4. Notes to Financial Statements as of October 31, 1996.
5. Schedule of Investments as of October 31, 1996.
6. Report of Independent Certified Public Accountants dated
November 20, 1996.
(iii) Financial Statements filed in Part B of the Registration Statement
(each of the following financial statements for the New Opportunities
fund is contained in the Part B of this Registration Statement):
1. Statement of Assets and Liabilities at January 31, 1997
(unaudited).
2. Statement of Operations for the period ended January 31, 1997
(unaudited).
3. Statement of Changes in Net Assets for the period ended January
31, 1997 (unaudited).
4. Notes to Financial Statements as of January 31, 1997 (unaudited).
(b) Exhibits (all exhibits not filed herewith are being incorporated
herein by reference)
1. (a) Articles of Incorporation of Twentieth Century Investors,
Inc., dated July 2, 1990 (filed electronically as an Exhibit
to Post-Effective Amendment No. 73 on Form N-1A on February
29, 1996, File No. 2-14213).
(b) Articles of Amendment of Twentieth Century Investors, Inc.,
dated November 20, 1990 (filed electronically as an Exhibit to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996, File No. 2-14213).
(c) Articles of Merger of Twentieth Century Investors, Inc., a
Maryland corporation and Twentieth Century Investors, Inc.,
a Delaware corporation, dated February 22, 1991 (filed
electronically as an Exhibit to Post-Effective Amendment No.
73 on Form N-1A on February 29, 1996, File No. 2-14213).
(d) Articles of Amendment of Twentieth Century Investors, Inc.,
dated August 11, 1993 (filed electronically as an Exhibit to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996, File No. 2-14213).
(e) Articles Supplementary of Twentieth Century Investors, Inc.,
dated September 3, 1993 (filed electronically as an Exhibit
to Post-Effective Amendment No. 73 on Form N-1A on February
29, 1996, File No. 2-14213).
(f) Articles Supplementary of Twentieth Century Investors, Inc.,
dated April 28, 1995 (filed electronically as an Exhibit
to Post-Effective Amendment No. 73 on Form N-1A on February
29, 1996, File No. 2-14213).
(g) Articles Supplementary of Twentieth Century Investors, Inc.,
dated November 17, 1995 (filed electronically as an Exhibit
to Post-Effective Amendment No. 73 on Form N-1A on February
29, 1996, File No. 2-14213).
(h) Articles Supplementary of Twentieth Century Investors, Inc.,
dated January 30, 1996 (filed electronically as an Exhibit
to Post-Effective Amendment No. 73 on Form N-1A on February
29, 1996, File No. 2-14213).
(i) Articles Supplementary of Twentieth Century Investors, Inc.,
dated March 11, 1996 (filed electronically as an Exhibit
to Post-Effective Amendment No. 75 on Form N-1A on June 14,
1996.
(j) Articles of Amendment of Twentieth Century Investors, Inc.,
dated December 2, 1996 (filed herewith as EX-99.B1j).
(k) Articles Supplementary of American Century Mutual Funds, Inc.,
dated December 2, 1996 (filed herewith as EX-99.B1k).
2. By-laws of Twentieth Century Investors, Inc. (filed electronically
as an Exhibit to Post-Effective Amendment No. 73 on Form N-1A on
February 29, 1996, File No. 2-14213).
3. Voting Trust Agreements - None.
4. Specimen copy of stock certificate - all series (filed herewith as
EX-99.B4).
5. (a) Management Agreement between Twentieth Century Investors, Inc.
and Investors Research Corporation dated August 1, 1994
(filed electronically as an Exhibit to Post-Effective
Amendment No. 75 on Form N-1A on June 14, 1996).
(b) Addendum to Management Agreement between Twentieth Century
Investors, Inc. and Investors Research Corporation dated
August 1, 1996 (filed electronically as an Exhibit to
Post-Effective Amendment No. 75 on Form N-1A on June 14,
1996).
(c) Management Agreement-Advisor Class between Twentieth Century
Investors, Inc. and Investors Research Corporation dated
September 1, 1996 (filed electronically as an Exhibit to
Post-Effective Amendment No. 75 on Form N-1A on June 14,
1996).
(d) Management Agreement-Service Class between Twentieth Century
Investors, Inc. and Investors Research Corporation dated
September 1, 1996 (filed electronically as an Exhibit to
Post-Effective Amendment No. 75 on Form N-1A on June 14,
1996).
(e) Management Agreement-Institutional Class between Twentieth
Century Investors, Inc. and Investors Research Corporation
dated September 1, 1996 (filed electronically as an Exhibit
to Post-Effective Amendment No. 75 on Form N-1A on June 14,
1996).
6. Distribution Agreement between TCI Portfolios, Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Premium Reserves, Inc., Twentieth
Century Strategic Asset Allocations, Inc., Twentieth Century
World Investors, Inc. and Twentieth Century Securities, Inc.
dated September 3, 1996 (filed electronically as an Exhibit to
Post-Effective Amendment No. 75 on Form N-1A on June 14, 1996).
7. Bonus and Profit Sharing Plan, Etc. - None.
8. (a) Custodian Agreement dated September 21, 1994 for ACH
transactions, between Twentieth Century Investors, Inc. and
United Missouri Bank of Kansas City, N.A.(filed herewith as
EX-99.B8a).
(b) Custody Agreement dated September 12, 1995, between UMB Bank,
N.A., Investors Research Corporation, Twentieth Century
Investors, Inc., Twentieth Century World Investors, Inc.,
Twentieth Century Premium Reserves, Inc. and Twentieth Century
Capital Portfolios, Inc. (filed electronically as an Exhibit
to Pre-Effective Amendment No. 4 on Form N-1A of Twentieth
Century Strategic Asset Allocations, Inc., Commission File No.
33-79482).
(c) Amendment No. 1 to Custody Agreement dated January 25, 1996,
between UMB Bank, N.A., Investors Research Corporation,
Twentieth Century Investors, Inc., Twentieth Century World
Investors, Inc., Twentieth Century Premium Reserves, Inc.,
Twentieth Century Capital Portfolios, Inc. and Twentieth
Century Strategic Asset Allocations, Inc.(filed electronically
as an Exhibit to Pre-Effective Amendment No. 4 on Form N-1A of
Twentieth Century Strategic Asset Allocations, Inc.,
Commission File No. 33-79482).
(d) Global Custody Agreement between The Chase Manhattan Bank
and the Twentieth Century and Benham funds, dated August 9,
1996. (filed electronically as an Exhibit to Post-Effective
Amendment No. 31 on Form N-1A of American Century Government
Income Trust, Commission File No. 2-99222
(e) Master Agreement between Commerce Bank, N.A. and Twentieth
Century Services, Inc. dated January 22, 1997 (filed herewith
as EX-99.B8e).
9. Transfer Agency Agreement between Twentieth Century Investors,
Inc. and Twentieth Century Services, Inc. dated March 1, 1991
(filed herewith as EX-99.B9).
10. Opinion and Consent of Counsel (filed herewith as EX-99.B10).
11. Consent of Baird, Kurtz & Dobson (filed herewith as EX-99.B11).
12. Equity Funds and Fixed Income Funds Annual Reports, dated
October 31, 1996 (filed electronically on December 23, 1996).
13. Agreements for Initial Capital, Etc. - None.
14. Model Retirement Plans (filed on May 6, 1991, as Exhibits
14(a)-(d) to Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A of Twentieth Century World Investors, Inc.,
Commission File No. 33-39242).
15. (a) Master Distribution and Shareholder Services Plan of
Twentieth Century Capital Portfolios, Inc., Twentieth Century
Investors, Inc., Twentieth Century Strategic Asset
Allocations, Inc. and Twentieth Century World Investors, Inc.
(Advisor Class) dated September 3, 1996 (filed electronically
as an Exhibit to Post-Effective Amendment to No. 75 on Form
N-1A on June 14, 1996).
(b) Shareholder Services Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth
Century Strategic Asset Allocations, Inc. and Twentieth
Century World Investors, Inc. (Service Class) dated September
3, 1996 (filed electronically as an Exhibit to Post-Effective
Amendment to No. 75 on Form N-1A on June 14, 1996).
16. Schedules For Computation of Advertising Performance Quotations
(filed herewith as EX-99.B16).
17. Power of Attorney (filed herewith as EX-99.B17).
18. Multiple Class Plan of Twentieth Century Capital
Portfolios, Inc., Twentieth Century Investors, Inc., Twentieth
Century Strategic Asset Allocations, Inc. and Twentieth
Century World Investors, Inc. dated September 3, 1996 (filed
electronically as an Exhibit to Post-Effective Amendment to No. 75
on Form N-1A on June 14, 1996).
27. (a) Financial Data Schedules for Growth Fund (EX-27.1.1).
(b) Financial Data Schedules for Select Fund (EX-27.1.2).
(c) Financial Data Schedules for Ultra Fund (EX-27.1.3).
(d) Financial Data Schedules for Vista Fund (EX-27.1.4).
(e) Financial Data Schedules for Giftrust (EX-27.1.5).
(f) Financial Data Schedules for Short-Term Government Fund
(EX-27.5.6).
(g) Financial Data Schedules for Cash Reserve Fund (EX-27.4.7).
(h) Financial Data Schedules for Benham Bond Fund (EX-27.5.8).
(i) Financial Data Schedules for Intermediate-Term Tax-Exempt Fund
(EX-27.5.9).
(j) Financial Data Schedules for Long-Term Tax-Exempt Fund
(EX-27.5.10).
(k) Financial Data Schedules for Heritage Fund (EX-27.1.11).
(l) Financial Data Schedules for Balanced Fund (EX-27.7.12).
(m) Financial Data Schedules for Limited-Term Tax-Exempt Fund
(EX-27.5.13).
(n) Financial Data Schedules for Limited-Term Bond Fund
(EX-27.5.14).
(o) Financial Data Schedules for Intermediate-Term Bond Fund
(EX-27.5.15).
(p) Financial Data Schedules for Intermediate-Term Government Fund
(EX-27.5.16).
(q) Financial Data Schedules for New Opportunities Fund
(EX-27.1.17).
ITEM 25. Persons Controlled by or Under Common Control with Registrant - None.
ITEM 26. Number of Holders of Securities
Title of Class Number of Record Holders
as of January 31, 1997
Single Investor Institutional Advisor
Class Class Class Class
Growth Fund - 274,727 - -
Select Fund - 257,239 - -
Ultra Investors - 817,173 1 3
Short-Term Government Fund - 21,677 - -
Vista Fund - 168,223 1 1
Giftrust 274,101 - - -
Cash Reserve Fund - 104,243 - -
Benham Bond Fund - 11,327 - -
Limited-Term Tax-Exempt Fund 1,110 - - -
Intermediate-Term Tax-Exempt Fund 2,403 - - -
Long-Term Tax-Exempt Fund 1,911 - - -
Heritage Fund - 83,580 - -
Balanced Fund - 57,353 - 1
Limited-Term Bond Fund - 439 - -
Intermediate-Term Bond Fund - 1,099 - -
Intermediate-Term Government Fund - 1,230 - -
New Opportunities Fund 3,240 - - -
ITEM 27. Indemnification.
The Corporation is a Maryland corporation. Section 2-418 of the General
Corporation Law of Maryland allows a Maryland corporation to indemnify its
directors, officers, employees and agents to the extent provided in such
statute.
Article Eighth of the Articles of Incorporation requires the
indemnification of the corporation's directors and officers to the extent
permitted by the General Corporation Law of Maryland, the Investment
Company Act and all other applicable laws.
The registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and directors may
incur while acting in such capacities and providing reimbursement to the
registrant for sums which it may be permitted or required to pay to its
officers and directors by way of indemnification against such liabilities,
subject in either case to clauses respecting deductibility and
participation.
ITEM 28. Business and Other Connections of Investment Advisor.
American Century Investment Management, Inc., the investment advisor, is
engaged in the business of managing investments for deferred compensation
plans and other institutional investors.
ITEM 29. Principal Underwriters - None.
ITEM 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder, are in
the possession of American Century Mutual Funds, Inc., American Century
Services Corporation and American Century Investment Management, Inc., all
located at American Century Tower, 4500 Main Street, Kansas City, Missouri
64111.
ITEM 31. Management Services - None.
ITEM 32. Undertakings
a. Not Applicable.
b. Not Applicable.
c. Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
d. The Registrant hereby undertakes that it will, if requested to do so
by the holders of at least 10% of the Registrant's outstanding shares,
call a meeting of shareholders for the purpose of voting upon the
question of the removal of a director and to assist in communication
with other shareholders as required by Section 16(c).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Twentieth Century Investors, Inc., the
Registrant, has duly caused this Post-Effective Amendment No. 76 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kansas City, State of Missouri on the 28th day
of February, 1997.
American Century Mutual Funds, Inc.
(Registrant)
By: /s/James E. Stowers III
James E. Stowers III, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 76 has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
*James E. Stowers, Jr. Chairman, Director and February 28, 1997
James E. Stowers, Jr. Principal Executive Officer
*James E. Stowers III President and Director February 28, 1997
James E. Stowers III
*Robert T. Jackson Executive Vice President February 28, 1997
Robert T. Jackson and Principal Financial Officer
*Maryanne Roepke Vice President, Treasurer and February 28, 1997
Maryanne Roepke Principal Accounting Officer
*Thomas A. Brown Director February 28, 1997
Thomas A. Brown
*Robert W. Doering, M.D. Director February 28, 1997
Robert W. Doering, M.D.
*Linsley L. Lundgaard Director February 28, 1997
Linsley L. Lundgaard
*Donald H. Pratt Director February 28, 1997
Donald H. Pratt
*Lloyd T. Silver, Jr. Director February 28, 1997
Lloyd T. Silver, Jr.
*M. Jeannine Strandjord Director February 28, 1997
M. Jeannine Strandjord
*D. D. (Del) Hock Director February 28, 1997
D. D. (Del) Hock
*By /s/James E. Stowers III
James E. Stowers III
Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER
EX-99.B1a Articles of Incorporation of Twentieth Century Investors, Inc.,
dated July 2, 1990. (filed as a part of Post-Effective Amendment
#73 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference.)
EX-99.B1b Articles of Amendment of Twentieth Century Investors, Inc., dated
November 20, 1990. (filed as a part of Post-Effective Amendment
#73 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference.)
EX-99.B1c Articles of Merger of Twentieth Century Investors, Inc., a Maryland
corporation and Twentieth Century Investors, Inc., a Delaware
corporation, dated February 22, 1991. (filed as a part of
Post-Effective Amendment #73 to the Registration Statement on Form
N-1A of the Registrant, Commission File No. 2-14213, filed on
February 29, 1996, and incorporated herein by reference.)
EX-99.B1d Articles of Amendment of Twentieth Century Investors, Inc., dated
August 11, 1993. (filed as a part of Post-Effective Amendment
#73 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference.)
EX-99.B1e Articles Supplementary of Twentieth Century Investors, Inc., dated
September 3, 1993. (filed as a part of Post-Effective Amendment
#73 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference.)
EX-99.B1f Articles Supplementary of Twentieth Century Investors, Inc., dated
April 28, 1995. (filed as a part of Post-Effective Amendment
#73 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference.)
EX-99.B1g Articles Supplementary of Twentieth Century Investors, dated
November 17, 1995. (filed as a part of Post-Effective Amendment
#73 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference.)
EX-99.B1h Articles Supplementary of Twentieth Century Investors, Inc., dated
January 30, 1996. (filed as a part of Post-Effective Amendment
#73 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference.)
EX-99.B1i Articles Supplementary of Twentieth Century Investors, Inc., dated
March 11, 1996. (filed as a part of Post-Effective Amendment #75 to
the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on June 14, 1996, and
incorporated herein by reference.)
EX-99.B1j Articles of Amendment of Twentieth Century Investors, Inc. dated
December 2, 1996 is included herein.
EX-99.B1k Articles Supplementary of American Century Mutual Funds, Inc. dated
December 2, 1996 is included herein.
EX-99.B2 Bylaws of Twentieth Century Investors, Inc. (filed as a part of
Post-Effective Amendment #73 to the Registration Statement on Form
N-1A of the Registrant, Commission File No. 2-14213, filed on
February 29, 1996, and incorporated herein by reference.)
EX-99.B4 Specimen certificate representing shares of common stock of
American Century Mutual Funds, Inc. is included herein.
EX-99.B5a Management Agreement, dated as of August 1, 1994, between Twentieth
Century Investors, Inc. and Investors Research Corporation.(filed
as a part of Post-Effective Amendment #75 to the Registration
Statement on Form N-1A of the Registrant, Commission File No.
2-14213, filed on June 14, 1996, and incorporated herein by
reference.)
EX-99.B5b Addendum to Management Agreement, dated as of August 1, 1996,
between Twentieth Century Investors, Inc. and Investors Research
Corporation.(filed as a part of Post-Effective Amendment #75 to the
Registration Statement on Form N-1A of the Registrant, Commission
File No. 2-14213, filed on June 14, 1996, and incorporated herein
by reference.)
EX-99.B5c Management Agreement-Advisor Class, dated as of September 1, 1996,
between Twentieth Century Investors, Inc. and Investors Research
Corporation.(filed as a part of Post-Effective Amendment #75 to the
Registration Statement on Form N-1A of the Registrant, Commission
File No. 2-14213, filed on June 14, 1996, and incorporated herein
by reference.)
EX-99.B5d Management Agreement-Service Class, dated as of September 1, 1996,
between Twentieth Century Investors, Inc. and Investors Research
Corporation.(filed as a part of Post-Effective Amendment #75 to the
Registration Statement on Form N-1A of the Registrant, Commission
File No. 2-14213, filed on June 14, 1996, and incorporated herein
by reference.)
EX-99.B5e Management Agreement-Institutional Class, dated as of September 1,
1996, between Twentieth Century Investors, Inc. and Investors
Research Corporation.(filed as a part of Post-Effective Amendment
#75 to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on June 14, 1996, and
incorporated herein by reference.)
EX-99.B6 Distribution Agreement between TCI Portfolios, Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century
Strategic Asset Allocations, Inc., Twentieth Century World
Investors, Inc. and Twentieth Century Securities, Inc. dated
September 3, 1996.(filed as a part of Post-Effective Amendment #75
to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on June 14, 1996, and
incorporated herein by reference.)
EX-99.B8a Custodian Agreement for ACH transactions, dated September 21, 1994
between Twentieth Century Investors, Inc. and United Missouri Bank
of Kansas City, N.A. is included herein.
EX-99.B8b Custody Agreement dated September 12, 1995, between United Missouri
Bank of Kansas City, N.A., Investors Research Corporation,
Twentieth Century Investors, Inc., Twentieth Century World
Investors, Inc., Twentieth Century Premium Reserves, Inc. and
Twentieth Century Capital Portfolios, Inc. (filed as Exhibit 8(e)
to Pre-Effective Amendment No. 4 to the Registration Statement on
Form N-1A of Twentieth Century Strategic Asset Allocations, Inc.,
Commission File No. 33-79482, filed February 5, 1996).
EX-99.B8c Amendment No. 1 to Custody Agreement dated January 25, 1996,
between United Missouri Bank of Kansas City, N.A., Investors
Research Corporation, Twentieth Century Investors, Inc., Twentieth
Century World Investors, Inc., Twentieth Century Premium Reserves,
Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth
Century Strategic Asset Allocations, Inc. (filed as Exhibit 8(e) to
Pre-Effective Amendment No. 4 to the Registration Statement on Form
N-1A of Twentieth Century Strategic Asset Allocations, Inc.,
Commission File No. 33-79482, filed February 5, 1996).
EX-99.B8d Global Custody Agreement between The Chase Manhattan Bank and the
Twentieth Century and Benham funds, dated August 9, 1996 (filed
Exhibit-99.B8 as a part of Post-Effective Amendment No. 31 to the
Registration Statement on Form N-1A of American Century Goverment
Income Trust, Commission File No. 2-99222, filed February 7, 1997,
and incorporated herein by reference.)
EX-99.B8e Master Agreement between Commerce Bank, N.A. and Twentieth Century
Services, Inc. dated January 22, 1997, is included herein.
EX-99.B9 Transfer Agency Agreement dated as of March 1, 1991, by and between
Twentieth Century Investors, Inc. and Twentieth Century Services,
Inc. is included herein.
EX-99.B10 Opinion and Consent of Charles A. Etherington, Esq.
EX-99.B11 Consent of Baird, Kurtz & Dobson.
EX-99.B12a Equity Funds Annual Report and Fixed Income Funds Annual Reports of
Twentieth Century Investors, Inc. dated October 31, 1996, filed on
December 23, 1996, and incorporated herein by reference.
EX-99.B14 Model Retirement Plans (filed as Exhibits 14(a), 14(b), 14(c) and
14(d) to Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A of Twentieth Century World Investors, Inc.,
Commission File No. 33-39242, filed May 6, 1991, and incorporated
herein by reference).
EX-99.B15a Master Distribution and Shareholder Services Plan of Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Strategic Asset Allocations, Inc. and
Twentieth Century World Investors, Inc. (Advisor Class) dated
September 3, 1996.(filed as a part of Post-Effective Amendment #75
to the Registration Statement on Form N-1A of the Registrant,
Commission File No. 2-14213, filed on June 14, 1996, and
incorporated herein by reference.)
EX-99.B15b Shareholder Services Plan of Twentieth Century Capital Portfolios,
Inc., Twentieth Century Investors, Inc., Twentieth Century
Strategic Asset Allocations, Inc. and Twentieth Century World
Investors, Inc. (Service Class) dated September 3, 1996.(filed as a
part of Post-Effective Amendment #75 to the Registration Statement
on Form N-1A of the Registrant, Commission File No. 2-14213, filed
on June 14, 1996, and incorporated herein by reference.)
EX-99.B16 Schedules for Computations of Advertising Performance Quotations.
EX-99.B17 Power of Attorney dated February 15, 1997, is included herein.
EX-99.B18 Multiple Class Plan of Twentieth Century Capital Portfolios, Inc.,
Twentieth Century Investors, Inc., Twentieth Century Strategic
Asset Allocations, Inc. and Twentieth Century World Investors, Inc.
dated September 3, 1996.(filed as a part of Post-Effective
Amendment #75 to the Registration Statement on Form N-1A of the
Registrant, Commission File No. 2-14213, filed on June 14, 1996,
and incorporated herein by reference.)
EX-27.1.1 Financial Data Schedule for Growth Fund.
EX-27.1.2 Financial Data Schedule for Select Fund.
EX-27.1.3 Financial Data Schedule for Ultra Fund.
EX-27.1.4 Financial Data Schedule for Vista Fund.
EX-27.1.5 Financial Data Schedule for Giftrust.
EX-27.5.6 Financial Data Schedule for Short-Term Government Fund.
EX-27.4.7 Financial Data Schedule for Cash Reserve Fund.
EX-27.5.8 Financial Data Schedule for Benham Bond Fund.
EX-27.5.9 Financial Data Schedule for Intermediate-Term Tax-Exempt Fund.
EX-27.5.10 Financial Data Schedule for Long-Term Tax-Exempt Fund.
EX-27.1.11 Financial Data Schedule for Heritage Fund.
EX-27.7.12 Financial Data Schedule for Balanced Fund.
EX-27.5.13 Financial Data Schedule for Limited-Term Tax-Exempt Fund.
EX-27.5.14 Financial Data Schedule for Limited-Term Bond Fund.
EX-27.5.15 Financial Data Schedule for Intermediate-Term Bond Fund.
EX-27.5.16 Financial Data Schedule for Intermediate-Term Government Fund.
EX-27.1.17 Financial Data Schedule for New Opportunities Fund.
ARTICLES OF AMENDMENT
OF
TWENTIETH CENTURY INVESTORS, INC.
The undersigned, William M. Lyons, in accordance with the Maryland
General Corporation Law, does hereby certify that:
1. He is the duly elected Executive Vice President of Twentieth Century
Investors, Inc., a Maryland corporation (the "Corporation").
2. The amendment to the Articles of Incorporation of the Corporation,
which was approved as of November 23, 1996 by the Board of Directors of the
Corporation at a meeting pursuant to Section 2-605(a)(4) of the Maryland General
Corporation Law, is as follows:
The Articles of Incorporation of the Corporation are hereby
amended by deleting all of the present Article SECOND and inserting in
lieu therefor the following Article SECOND:
"SECOND: The name of the Corporation is
American Century Mutual Funds, Inc."
3. The amendment shall be effective January 1, 1997.
IN WITNESS WHEREOF, the undersigned hereby acknowledges that these
Articles of Amendment are the act of the Corporation and states, that to the
best of his knowledge, information and belief, the matters and facts stated
herein are true in all material respects, and that this statement is made under
penalties of perjury.
Dated this 2nd day of December, 1996.
/s/ William M. Lyons
William M. Lyons
Executive Vice President
Witness:
/s/ Charles A. Etherington
Charles A. Etherington
Assistant Secretary
AMERICAN CENTURY MUTUAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
AMERICAN CENTURY MUTUAL FUNDS, INC., a Maryland corporation whose
principal Maryland office is located in Baltimore, Maryland (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SECOND: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 2-605(a)(4) of the Maryland General
Corporation Law, the Board of Directors of the Corporation has renamed the duly
established and allocated series of the Corporation's stock as follows:
<TABLE>
New Series Name Prior Series Name
<S> <C>
American Century - Twentieth Century Growth Investors
Growth Fund
American Century - Twentieth Century Select Investors
Select Fund
American Century - Twentieth Century Ultra Investors
Ultra Fund
American Century - Twentieth Century Vista Investors
Vista Fund
American Century - Twentieth Century Heritage Investors
Heritage Fund
American Century - Twentieth Century Giftrust Investors
Giftrust
American Century Balanced Fund Balanced Investors
American Century - Benham Cash Cash Reserve
Reserve Fund
American Century - Benham Short-Term U.S. Governments Short-Term
Government Fund
American Century - Benham Bond Fund Long-Term Bond
American Century - Benham Intermediate-Term Tax-Exempt Intermediate-Term
Tax-Exempt Fund
American Century - Benham Long-Term Tax-Exempt Long-Term
Tax-Exempt Fund
American Century - Benham Limited-Term Tax-Exempt Short-Term
Tax-Exempt Fund
American Century - Benham Intermediate-Term U.S. Governments Intermediate-Term
Government Fund
American Century - Benham Limited-Term Limited Term Bond
Bond Fund
American Century - Benham Intermediate-Term Intermediate-Term Bond
Bond Fund
American Century - Twentieth Century New Twentieth Century New
Opportunities Fund Opportunities Fund
The name changes shall be effective on January 1, 1997.
</TABLE>
THIRD: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to serialize, classify or
reclassify and issue any unissued shares of any Series or Class or any unissued
shares that have not been allocated to a Series or Class, and to fix or alter
all terms thereof, to the full extent provided by the Articles of Incorporation
of the Corporation.
FOURTH: A description of the series and classes of shares, including
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions for
redemption is set forth in the Articles of Incorporation of the Corporation and
is not changed by these Articles Supplementary, except with respect to the
creation and/or designation of the various Series.
FIFTH: The Board of Directors of the Corporation duly adopted
resolutions renaming the Series, as set forth in Article SECOND.
IN WITNESS WHEREOF, AMERICAN CENTURY MUTUAL FUNDS, INC. has caused
these Articles Supplementary to be signed and acknowledged in its name and on
its behalf by its Executive Vice President and its corporate seal to be hereunto
affixed and attested to by its Assistant Secretary on this 2nd day of December,
1996.
AMERICAN CENTURY MUTUAL
ATTEST: FUNDS, INC.
/s/ Patrick A. Looby By: /s/ William M. Lyons
Name: Patrick A. Looby Name: William M. Lyons
Title: Assistant Secretary Title: Executive Vice President
THE UNDERSIGNED Executive Vice President of AMERICAN CENTURY MUTUAL
FUNDS, INC., who executed on behalf of said Corporation the foregoing Articles
Supplementary to the Charter, of which this certificate is made a part, hereby
acknowledges, in the name of and on behalf of said Corporation, the foregoing
Articles Supplementary to the Charter to be the corporate act of said
Corporation, and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects under the penalties of
perjury.
Dated: December 2, 1996 /s/ William M. Lyons
William M. Lyons, Executive Vice President
Specimen Stock Certificate
AMERICAN CENTURY - (name of series)
A Series of the Capital Stock of
American Century Mutual Funds, Inc.
Incorporated Under the Laws of the State of Maryland
NUMBER DATED SHARES
This is to Certify that
IS THE OWNER OF THE FULLY PAID AND NON-ASSESSABLE SHARES STATED ABOVE OF
American Century - (name of series)
(name of class)
A series of the Capital Stock, Par Value $0.01, of American Century Mutual
Funds, Inc.
(american century logo)
American
Century (sm)
[printed vertically along right margin]
Countersigned:
By---------------Transfer Clerk
The Corporation will furnish without charge to each Shareholder who so
requests the designations and the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of each series and class of stock of the
Corporation.
This certificate and the shares represented hereby are issued and shall be
held subject to all the provisions of the Articles of Incorporation of the
Corporation and all amendments thereto, copies of which are on file at the
executive offices of the Corporation, and the holder hereof by acceptance of
this certificate consents and agrees to be bound by all of said provisions.
This certificate is not valid until countersigned by an authorized Transfer
Clerk of the Corporation.
WITNESS the facsimile signatures of the Corporation's duly authorized
officers.
/s/William M. Lyons /s/James E. Stowers III
William M. Lyons James E. Stowers III
SECRETARY PRESIDENT
[front of certificate]
FOR VALUE RECEIVED,-----------------------------HEREBY SELL, ASSIGN AND TRANSFER
unto----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said Stock on the books of the within named issuer with full
power of substitution in the premises.
DATED:------------------- -------------------------------
Signature
-------------------------------
Signature
(signature guarantee stamp)
[printed vertically along far right margin]
NOTICE: The signature(s) on this assignment must correspond with the
name(s) as written upon the face of the certificate, in every particular,
without alteration or any change whatever.
The signature(s) must be guaranteed by a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law. Notarized or witnessed
signatures are not acceptable as guaranteed signatures.
[back of certificate]
CUSTODIAN AGREEMENT
WHEREAS, TWENTIETH CENTURY INVESTORS, INC., a Maryland corporation
("Corporation") desires to appoint a custodian with respect to certain monies
received from shareholders for the purchase of its shares; and
WHEREAS, UNITED MISSOURI BANK OF KANSAS CITY, N.A., a
nationally-chartered banking association ("Custodian"), desires to serve as a
custodian for these assets of the Corporation;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:
1. During the term of this Agreement the Corporation shall maintain one
or more custody accounts (the "Accounts") with the Custodian and shall deposit
in the Accounts all Automated Clearing House (ACH) purchases designated for the
Corporation in payment for its shares.
2. The Custodian shall process all ACH purchases pursuant to that
certain Electronic Entries Agreement dated September 13, 1994, between the
Custodian and Twentieth Century Services, Inc.
3. The Custodian promptly and in a business-like manner shall process
the items so deposited in the Accounts and remit the funds deposited to United
States Trust Company of New York, the Corporation's Custodian, for deposit in
Corporation's accounts there. Any funds not remitted by the close of each day
shall be invested for the Corporation's benefit in such manner as the
Corporation and Custodian may from time to time agree upon. All income from such
investments shall be deposited in the Accounts. No funds shall be invested or
otherwise utilized for the benefit of the Custodian.
4. (a) The Custodian shall no later that 9 a.m. on every day
(Saturdays, Sundays and Holidays excluded) report to the Corporation the balance
in the Accounts and the amounts available for transfer to United States Trust
Company of New York.
(b) The Custodian shall furnish monthly bank statements of the
Accounts in the usual form.
(c) At least monthly the Custodian shall provide the Corporation
with an account analysis showing average ledger and collected balance for the
month, total items processed and other bank services used during the period.
5. If the Corporation instructs the Custodian in any capacity to take
any action with respect to any funds held by it hereunder, which action might
subject the Custodian in the opinion of the Custodian to liability for any cost,
loss, damage or expense, as a prerequisite to taking such action the Custodian
shall be and be kept indemnified in an amount and form satisfactory to it.
6. This Agreement may be terminated by the Corporation in whole or in
part upon ten (10) days written notice delivered to the Custodian at 10th &
Grand Streets, Kansas City, Missouri 64105 (mailing address P. O. Box 419226,
Kansas City, Missouri 64141) or by the Custodian upon sixty (60) days written
notice delivered to the Corporation at 4500 Main Street, Kansas City, Missouri
64111 (mailing address P. O. Box 419200, Kansas City, Missouri 64141), and each
party may from time to time designate another address to which such notice shall
be delivered. Such notices shall be sent by registered mail and shall be deemed
delivered when deposited in the United States Mail, postage prepaid. In the
event of the inability of the Custodian to serve or other termination of this
Agreement by either party, the Corporation shall forthwith appoint a custodian
which qualifies as such under the Investment Company Act of 1940 or any other
applicable law and the Custodian shall deliver all funds to such successor
custodian (or to any other Custodian of the Corporation's assets) and such
delivery shall constitute a full and complete discharge of the Custodian's
obligations hereunder. If no such successor shall be found and there should be
no other custodian, the Corporation shall submit to the holders of shares of its
capital stock, before permitting delivery of such cash to anyone other than a
qualified custodian, the question whether the Corporation shall be dissolved or
shall function without a Custodian; and pending such decision the Custodian
shall,
(a) continue to hold the Accounts, or
(b) deliver the funds in the Accounts, and all other assets,
if any, to a Bank or Trust Company selected by it, such funds and assets to be
held subject to the terms of custody hereunder and any such delivery shall be a
full and complete discharge of its obligations hereunder.
7. If the Corporation shall be liquidated while this Agreement is in
force, the Custodian shall distribute the property of the Corporation to
creditors and shareholders in such manner as the Corporation may direct.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its officer or
officers duly authorized, as of the 21st day of September, 1994.
TWENTIETH CENTURY INVESTORS, INC.
By: /s/ James E. Stowers III
Name: James E. Stowers III
Title: President
UNITED MISSOURI BANK OF KANSAS CITY, N.A.
By: /s/ Michael Porter
Name: Michael Porter
Title: Senior Vice President/
Director of Operations
MASTER AGREEMENT
Terms and Conditions
Cash Management Services
Company Name: Twentieth Century
Master Agreement Number: 44-0619208
COMMERCE BANK, N.A. ("Bank")
Twentieth Century Services, Inc. ("Company")
Introduction. Bank shall perform Services described in separate Service
Agreements and corresponding Service Manuals in accordance with this
Master Agreement and the respective Service Agreements and Service
Manuals. Banks may utilize outside service providers and agents in the
performance of all or any of the Services. If the terms of any of the
Service Agreements and/or Service Manuals conflict with this Master
Agreement, this Master Agreement shall control.
1. Company's Records and Media. The Company will provide to the Bank
all records and data processing media necessary to perform the Service.
The records will be legible, correct, complete and in the format
specified in the Service Agreements, Service Manuals and any related
schedules. The records will contain totals and proof information
satisfactory to the Bank. All data processing media supplied by the
company; must be specified by, or acceptable to, the Bank. Checks must
be MICR encoded in accordance with the Bank's specifications.
When any Service Agreement is terminated, the Company will instruct the
Bank in writing within sixty (60) days whether the Bank should return
or destroy any data processing media furnished by the Company and any
records produced as a part of terminated Services. If the company does
not instruct the Bank within such sixty (60) day period, the Bank may
destroy or return any such materials, and shall have no liability to
the company or any third party if such materials are destroyed or
otherwise not retained.
All specifications, tapes or other media, programs and procedures owned
by the Bank or its service providers in connection with the performance
of the Services, will be and remain the sole property of the Bank. The
Company will return such materials tot he Bank promptly upon request,
and shall be responsible for any damage to any such materials incurred
in shipping and usage other than normal wear and tear.
2. Company Failure to Furnish Satisfactory Records and Media. The
Bank's performance of Services is subject to the Bank's receipt of
timely, accurate and complete data for each Service, in form and on
media specified by, or acceptable to the Bank. If any of these
requirements are not met by the Company:
a. The Bank shall no longer be bound by the applicable production
and delivery schedules; and
b. The Bank shall be authorized to produce and deliver whatever
portion of the Services can be performed under the
circumstances.
In addition to the foregoing, the Company shall compensate the Bank at
the Bank's then current rates for the time and materials for converting
data from nonstandard form to standard form, or for completing missing
data.
3. Company's Duty to Inspect. The Company shall be responsible for
inspecting the work product for all Services performed, when received,
and for notifying the Bank immediately upon the discovery of any
errors. The Company must notify the Bank within a reasonable time after
receipt of the material containing any error, or of a report or
statement reflecting any error, and in any event, within the time
periods specified in the applicable Service Manuals. Except to the
extent otherwise provided by applicable law or this Agreement, failure
to notify the Bank of errors within the applicable time period will
relieve the Bank of any and all responsibility and liability relating
thereto.
4. Limitation of Liability. Except to the extent otherwise provided by
applicable law, the Bank's liability will be limited as set forth
herein. The Bank's liability shall be limited to actual damages
sustained by the Company and only to the extent such damages are a
direct result of the Bank's failure to act in good faith and exercise
ordinary care (as measured by the standard of care as set forth in
Section 12 below). The Bank shall not be liable for any act or omission
of th3 Company or any third party. Each Service Agreement shall
constitute a contract solely between the Bank and the Company, and the
Bank shall have no liability thereunder to any third party, or for any
charges imposed by any third party, EXCEPT TO THE EXTENT OTHERWISE
LIMITED BY APPLICABLE LAW, IN NO EVENT SHALL THE BANK BE LAIBLE FOR
SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY
KIND, INCLUDING LSOT PROFITS (WHETHER OR NOT THE BANK HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE.)
For transfers governed under Article 4A of the Uniform Commercial Code,
the Bank will compensate the Company, to the extent required by
applicable law, for the Company's loss of interest on funds as a direct
result of the Bank's failure to comply with such law in executing a
transfer, such compensation shall be based upon the Fed Funds Rate at
the Federal Reserve Bank of New York in effect at the time of the
claimed loss of interest (as determined by the Bank in its reasonable
discretion). Except to the extent otherwise provided by applicable law
or this Agreement, the Bank shall not be liable for the Company's
attorney's fees in connection with any claim for loss of interest, or
otherwise.
5. Fees. The Company shall compensate the Bank for the Services in
accordance with the Bank's fee schedules in effect from time to time.
The Bank may amend the fee schedules at any time and will endeavor to
give written notice thirty (30) days in advance, to the Company of
changes in fee schedules relating to Services then being performed for
the Company. If acceptable to the Bank, fees may be payable through the
maintenance by the Company of required compensating collected balances
in specified account(s) of the Company; the compensation collected
balance requirements will be measured by Bank's standard "analysis" of
the Company's specified account(s). In the alternative, Bank may bill
the Company for fees, by invoice. Each invoice shall be due and payable
within sixty (60) days of the date of invoice.
In addition to the fees to be paid by the Company, the Company agrees
to pay all sales, use or other taxes applicable to the Services
provided hereunder, excluding, however, taxes based upon the Bank's net
income.
6. Overdrafts; Set-off. In the event any actions by the Company should
result in an overdraft in any of its accounts, the Company shall be
responsible for immediately covering the overdraft (with immediately
available funds), together with interest thereon at a per annum rate
equal to two percent (2%) in excess of the Bank's published prime Rate.
Notwithstanding the foregoing, Bank shall no duty or obligation to
honor or effect any transfer which will result in an overdraft in any
of Company's accounts.
7. Credit Limits; Documentation. In the event the Services selected by
the Company and to be performed by the Bank may result in credit
exposure to the Bank, the Bank may limit the Company's transaction
volume of dollar amount and refuse to execute transactions that exceed
any such limit. The Company shall, upon request by the Bank from time
to time, provide to the Bank financial information and statements and
such other documentation as the Bank determines to be reasonably
necessary or appropriate to enable the Bank to evaluate its credit
exposure and the Company's credit worthiness. The Company shall provide
to the Bank, as the Bank may request from time to time, such
documentation (such as resolutions, incumbency certificates,
authorizations, agreements and other documents) relating to (without
limitation) the Company's authority to contract for the Services and/or
the Company's establishment of any deposit accounts.
8. Security Procedures. If the Services involve the establishment of
security procedures to be implemented and followed by Company, the
Company agrees that is shall be solely responsible to assure that such
security procedures are followed, as they may be amended from time to
time. If such security procedures are breached or violated, the Company
agrees to immediately notify Bank of any such breach or violation. THE
COMPANY ACKNOWLEDGES THAT IT HAS REVIEWED ALL APPLICABLE COMPANY
SECURITY PROCEDURES AND HAS DETERMINED, AS OF THE DATE HEROF, THAT
THOSE PROCEDURES ARE COMEMRCIALLY REASONABALE. THE COMPANY ALSO AGREES
THAT ITS EXECUTION OF ANY SERVICE AGAREEMENS IN THE FUTURE WILL
CONSTITUTE ITS ACKNOWLEDGMENET THAT ALL COMPANY SECURITY PROCEDURES
APPLCIABLE TO THE RESPECTIVE SERVICES ARE COMMERCIALLY REASONABLE. This
Section 8 shall survive termination of all Service Agreements.
9. Indemnity. The Company shall indemnify and hold the Bank harmless
from any and all claims, damages, losses, liabilities, costs and
expenses, including reasonable attorney's fees, which result from any
breach of a Service Agreement or this Master Agreement by the Company,
or which relate in any manner to the Services performed under this
Maser Agreement and the respective Service Agreements and Service
Manuals, except to the extent arising from the Bank's failure to
perform Services in accordance with the standard of care a set forth in
Section 12 below.
Bank hereby represents and warrants: (a) that Bank owns all
Bank-provided software, or has the authority to license the software as
provided in the Agreement; and (b) that the software does not now and
will not infringe any United States patent, copyright, trade secret or
other proprietary right of any third party. Bank, at its expense,
hereby agrees to indemnify and hold harmless Company, and defend any
actin brought against Company with respect to any claim, demand, cause
of action, cost, loss, damage, expense (including reasonable attorneys'
fees) or liability, arising from or based in any respect on a claim by
any third party that Company's use of any Bank-provided software or
documentation infringe, violate or in any manner contravene, breach or
constitute an unauthorized use of misappropriation of any patent,
copyright, license, trade secret or other property or proprietary
right.
10. Term. Each Service Agreement shall continue until terminated by
either party upon thirty (30) days prior written notice; provided,
however, each Service Agreement shall automatically terminate without
notice (i) upon the filing by or against the Company of any bankruptcy
petition for the appointment of a receiver, or upon the filing of any
other action alleging, or if a determination is made, that the Company
is insolvent, (ii) in the event that the Company's designated accounts
with the Bank are closed, (iii) u0pon termination of a third party
contract which is necessary for the performance of the Services, or
(iv) if either the Bank or the Company is hereafter prohibited by law
from performing or contracting for the Services. The Bank may also
terminate any Service Agreement immediately with or without notice if
the Bank determines that the Company has failed to maintain a financial
condition deemed necessary by the Bank, or in the event of a material
breach by the company of any agreement between the Company; and the
Bank.
11. Force Majeure. Neither party shall bear any responsibility for
non-performance of any Services caused by, or relating to, an event
beyond the applicable party's control, including, without limitation,
fire, casualty, breakdown in equipment of failure of telecommunications
or data processing services, sabotage, labor shortage, lockout, strike,
unavoidable accident, acts of God, riot, war or the enactment, issuance
or operation of any adverse governmental law, ruling, regulation, order
or decree, or an emergency or catastrophe that prevents or materially
interferes with the such party's normal operations. .
12. Standard of Care. Bank will exercise reasonable care to select and
use facilities, equipment, personnel and third party service providers
in connection with the activities to be performed under the respective
Service Agreements and this Master Agreement, with the same care as it
exercises in the conduct of its own banking operations. Bank shall
exercise reasonable care in performing its duties and obligations under
the Service Agreements.
13. Facsimile Signature. If the Company at any time authorizes or
permits utilization of a facsimile signature for any "authorized
signature", the Bank shall be entitled to honor and charge the Company
for all checks and other orders for payment of money so signed,
regardless of by whom or what means the purported or actual facsimile
signature may have been affixed thereto, is such orders are drawn in
the Company's name. Company agrees that all previous, present and
future authorizations shall continue in full force and effect until
Bank is advised din writing to the contrary and until Bank shall have
had a reasonable opportunity to at upon such advise.
14. Check Retention. If the Company chooses to have the Bank retain
copies of its paid checks, Company agrees not to make any claim against
the Bank arising out of the authorized destruction of the original
check, or the clarity of legibility of any copy that the Bank provides.
15. Business Purpose. The Company agrees that the Services to be
performed by the Bank will be sued by the Company solely for business
or commercial purposes and not for personal, family, or household
purposes.
16. Severability. If any provision of this Master Agreement or any
Service Agreement shall be determined by a court of competent
jurisdiction to be void or unenforceable as written, the affected
provision shall be interpreted so as to achieve, to the extent
permitted by applicable law, the purposes intended under the original
provision, and the remaining provisions of the Service Agreements and
this Master Agreement shall continue in full force and effect as
modified.
17. Headings; Complete Agreement. Headings are used for reference
purposes only and shall not be deemed a part of these Terms and
Conditions. The parties hereto acknowledge that each has read the
Service Agreements and this Master Agreement, understands them, and
agrees to be bound by the respective terms thereof. The parties further
agree that the Service Agreements, the Service Manuals and this Master
Agreement, and any written modifications made to any of the foregoing,
and the applicable deposit account agreements, shall constitute the
complete and exclusive expression of the agreements between the
parties, and shall specifically supersede all other proposals (whether
oral or written), understandings, representations, conditions,
warranties, covenants, and all other communications between the parties
relating to the subject matter of all of the foregoing.
18. Amendments; Assignments. The Bank may amend this Maser Agreement,
any Service Agreement and/or Service Manual at any time. Unless a
greater period is otherwise required by applicable law, the Bank will
use reasonable efforts to provide notice to the Company, at least (30)
days before the effective date, of any amendment which in the
reasonable opinion of Bank will materially alter the terms of this
Master Agreement, any Service Agreement and/or Service Manual. Company
may not assign any Service Agreement or any of its rights or duties
hereunder or thereunder to any person or entity without Bank's prior
written consent (which consent will not be unreasonably withheld or
delayed), and any attempted assignment without such consent shall be
null and void.
19. Notices. All notices required or permitted to be given hereunder
shall be effective when received if hand delivered or sent by
telecopier, or when deposited in the United States Mail, first class
postage prepaid, and addressed to the respective parties at the
addresses set forth below the respective signature lines contained
herein, or to such other address as either party shall have specified
in writing to the other.
20. Binding Agreement; Benefit. This Master Agreement shall be binding
upon and inure to the benefit of, and shall be enforceable exclusively
by and for the exclusive benefit of, the parties hereto and their
respective legal representatives, permitted successors and permitted
assigns.
21. Waiver of Jury Trial. COMPANY AND BANK HEREBY WAIVE THE RIGHT TO A
TRIAL BY JURY ON ANY MATTERS ARISING OUT OF THIS MASTER AGREEMENT OR
THE TRANSACTINS CONTEMPLETED HEREIN, IN THE SERVICE AGREEMENTS AND IN
THE SERVICE MANUALS.
22. Governing Law. This Master Agreement and the Service Agreements
shall be governed by, and interpreted in accordance with, the laws of
the State of Missouri.
Twentieth Century Services, Inc.
-------------------------------- ---------------------------------
Company Commerce Bank, N.A
By: /s/ Mary Anne Roepke By: /s/ Teresa Rouse
Maryanne Roepke 8/29/96 Teresa Rouse 1/22/97
Title: Vice President & Treasurer Title: Senior Vice President
Address for notice: Address for notice:
-------------- Commerce Bank, N.A.
-------------- Corporate Services
-------------- P.O. Box 419248
-------------- Kansas City, MO 64141-6248
<PAGE>
Commerce Bank, N.A.
The Cash Sweep Program
Sweep Service Agreement
I have received and reviewed the Goldman Sachs & Co. prospectus of the Financial
Square Trust Fund and appoint you, Commerce Bank, N.A. to implement a cash
management program whereby you will purchase service units in the Portfolio for
me [and the accompanying investment (purchase and redemption) requirements]. I
understand that you will purchase such units with funds which I may deliver to
you for such purpose, provided I maintain in my depository account with you (the
"Account") a minimum balance which shall be determined from time to time. As my
agent, you are also authorized and directed to purchase units in the Portfolio
with any cash balances remaining in my Account at the end of every business day
in excess of the minimum balance.
I understand that such cash balances in excess of the minimum balance will
either be invested directly at the end of every business day in units in the
Portfolio or will be swept into an omnibus account of the Bank which account, at
the beginning of the following business day, will invest such cash balances
directly in units in the Portfolio and that such units, when purchased, will be
allocated directly to the Account.
You are authorized to hold these units as unitholder of record and nominee for
my sole benefit and you are to maintain appropriate records of units purchased,
earnings on units held and units redeemed. Dividends on Portfolio units will be
reinvested in additional units. An accurate monthly statement showing all income
and principal cash received or disbursed by the Account during the period
covered shall be furnished.
You shall use "best efforts", as that term is understood in the investment
community, to invest all cash balances in excess of the minimum balance in
Portfolio units until you receive notice of any changes in this authorization.
Units held are to be redeemed as promptly as practicable and the cash received
for such redemptions credited to the Account whenever such cash is needed for
other uses as directed by me, to cover outstanding and unpaid checks drawn the
Account or to cover cash management fees and expense reimbursements charged to
the Account as described below. I Agree that I will not draw checks on my
deposit account in a fashion that will create an overdraft that will be used for
the purpose of buying, carrying or trading securities, or buying or carrying any
part of an investment contract security or obtaining such overdraft to repay
debt incurred for such purposes. I understand that the Bank shall immediately
obtain a security interest in the Portfolio units upon the occurrence of and to
the extent necessary to cover the amount of any overdraft incurred in the
Account for such period of time as said overdraft remains outstanding. The Bank,
in its sole discretion, alternatively may withhold from payment any outstanding
and unpaid check drawn on the Account until finds sufficient to cover such
outstanding and unpaid check have been credited to the Account as a result of
cash received from the redemption of Portfolio units.
This Agreement shall continue until you receive written notice of my revocation
or until you advise me that you do not wish to continue this service. Upon
revocation or termination, all Portfolio units then held shall be promptly
redeemed for cash and the proceeds delivered to my Account or to me after
payment of outstanding check or service fees, if any, as I may designate.
I understand that your responsibility is limited to the exercise of due care and
diligence in the custody of the assets you hold hereunder and in acting pursuant
to this Agreement. In no event, however, shall you be liable in any respect
except for negligence or willful breach of duties and in no event for losses due
to investment selection. I understand that Portfolio units are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency and do not constitute obligations of the Bank, but that the Bank acts
solely as agent for me in purchasing units.
I shall be responsible for all expenses, taxes, or other charges or liabilities
incurred by you in connection with the Account, and you are authorized to charge
my Account accordingly. You are authorized to supply information or to sign, as
my agent, documents required by any tax laws or other laws or regulations. In
addition, I expressly authorize you or your designee to act upon voice,
telegram, cablegram and radio messages received by you purporting to be sent by
me or by any dully authorized agent although bearing no test or other form of
confirmation. I assume all risk which may result from any action taken by you or
your designee in good faith in reliance on such communications.
I also acknowledge that fees will be paid monthly by the Portfolio and Goldman
Sachs Asset Management to the Bank as disclosed in the Portfolio prospectus.
This Agreement is governed by the laws of the State of Missouri.
I am completing the attached new account information form to facilitate the
establishment of this account.
Please confirm this authorization and direction with respect to the funds
delivered herein. This Agreement will be effective upon confirmation by you.
Signatures:
1. /s/ Maryanne Roepke
Maryanne Roepke
2./s/-----------------
--------------------
Accepted this day of ----- 199
Commerce Bank, N.A.
By:/s/ Carolyn M. Fitzgerald
Carolyn M. Fitzgerald
Account # ---------------------------
TRANSFER AGENCY AGREEMENT
Agreement made March 1, 1991 between Twentieth Century Investors, Inc.,
a Maryland corporation ("Twentieth Century"), and Twentieth Century Services,
Inc., a Missouri corporation ("Services").
1. By action of its Board of directors Twentieth Century on November
17, 1990 appointed Services as its transfer agent, and Services accepted such
appointment.
2. As transfer agent for Twentieth Century, Services shall perform all
the functions usually performed by transfer agents of investment companies, in
accordance with the policies and practices of Twentieth Century as disclosed in
its prospectus or otherwise communicated to Services from time to time,
including but not limited to, the following:
(a) Recording the ownership, transfer, conversion and cancellation
of ownership of shares of Twentieth Century on the books of
Twentieth Century;
(b) Causing the issuance, transfer, conversion and cancellation of
stock certificates of Twentieth Century;
(c) Establishing and maintaining records of accounts;
(d) Computing and causing to be prepared and mailed or otherwise
delivered to shareholders payment of redemption proceeds due
from Twentieth Century on redemption of shares and notices of
reinvestment in additional shares of dividends, stock
dividends or stock splits declared by Twentieth Century on
shares of Twentieth Century;
(e) Furnishing to shareholders such information as may be
reasonably required by Twentieth Century, including
confirmation of shareholder's transactions and appropriate
income tax information;
(f) Addressing and mailing to shareholders prospectuses, annual
and semiannual reports; addressing and mailing proxy materials
for shareholder meetings prepared by or on behalf of Twentieth
Century, and tabulating the proxy votes.
(g) Replacing allegedly lost, stolen or destroyed stock
certificates in accordance with and subject to usual and
customary procedures and conditions.
(h) Maintaining such books and records relating to transactions
effected by Services pursuant to this Agreement as are
required by the Investment Company Act, or by rules or
regulations thereunder, or by any other applicable provisions
of law, to be maintained by Twentieth Century or its transfer
agent with respect to such transactions; preserving, or
causing to be preserved, any such books and records for such
periods as may be required by any such law, rule or
regulation; furnishing Twentieth century such information as
to such transactions and at such times as may be reasonably
required by it to comply with applicable laws and regulations,
including but not limited to the laws of the several states of
the United States.
(i) Dealing with and answering all correspondence from or on
behalf of shareholders relating to its functions under this
agreement.
3. Twentieth Century may perform on site inspection of records and
accounts and perform audits directly pertaining to Twentieth Century shareholder
accounts services by Services hereunder at Services' facilities in accordance
with reasonable procedures at the frequency necessary to show proper
administration of this agreement and the proper audit of Twentieth Century's
financial statements. Services will cooperate with Twentieth Century's auditors
and the representatives of appropriate regulatory agencies and furnish all
reasonably requested records and data.
4. (a) Services will at all times exercise due diligence and good
faith in performing its duties hereunder. Services will make
every reasonable effort and take all reasonably available
measures to assure the adequacy of its personnel and
facilities as well as the accurate performance of all services
to be performed by it hereunder within the time requirement of
any applicable statutes, rules or regulations or as disclosed
in Twentieth Century's prospectus.
(b) Services shall not be responsible for, and Twentieth
Century agrees to indemnify Services, for any losses, damages
or expenses (including reasonable counsel fees and expenses)
(a) resulting from any claim, demand, action or suit not
resulting from Services' failure to exercise good faith or due
diligence and arising out of or in connection with Services
duties on behalf of the fund hereunder; (b) for any delay,
error, or omission by reason or circumstance beyond its
control, including acts of civil or military authority,
national emergencies, labor difficulties (except with response
to Services' employees), fire, mechanical breakdowns beyond
its control, flood or catastrophe, act of God, insurrection,
war, riot or failure beyond its control of transportation,
communication or power supply; or (c) for any action taken or
omitted to be taken by Services in good faith in reliance on
(i) the authenticity of any instrument or communication
reasonably believed by it to be genuine and to have been
properly made and signed or endorsed by an appropriate person,
or (ii) the accuracy of any records or information provided to
it by Twentieth Century, (iii) any authorization or
instruction contained in any officers' instruction, or (iv)
any advice of counsel approved by Twentieth Century who may be
internally employed counsel or outside counsel, in either case
for Twentieth Century of Services.
5. Services shall not look to Twentieth Century for compensation for
its services described herein. It shall be compensated entirely by Investors
Research Corporation, pursuant to the management agreement between Investors
Research Corporation and Twentieth Century which requires Investors Research
Corporation to pay all of the expenses of Twentieth Century.
6. This Agreement may be terminated by either party at any time without
penalty upon giving the other party 60 days written notice (which notice may be
waived by either party).
Upon termination Services will deliver to Twentieth Century all
microfilm records pertaining to shareholder accounts of Twentieth Century, and
all records of shareholder accounts in machine readable form in the format in
which they are maintained by Services.
All data processing programs used by Services in connection with the
performance of its duties under this Agreement are the sole and exclusive
property of Services, and after the termination of this Agreement, Twentieth
Century shall have no right to use the same.
IN WITNESS WHEREOF, the parties have executed this instrument the day
and year first above written.
Twentieth Century Investors, Inc.
By: /s/ William M. Lyons
William M. Lyons, Vice President
Twentieth Century Services, Inc.
By: /s/ Wendy B. Welte
Wendy B. Welte, Vice President
Charles A. Etherington
Attorney at Law
4500 Main Street P.O. Box 418210
Kansas City, Missouri 64141-9210
Telephone (816) 340-4051
Telecopier (816) 340-4964
--------------------------
February 28, 1997
American Century Mutual Funds, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to American Century Mutual Funds, Inc., I am generally familiar
with its affairs. Based upon this familiarity, and upon the examination of such
documents as I have deemed relevant, it is my opinion that the shares of the
Corporation described in Post-Effective Amendment No. 76 to its Registration
Statement on Form N-1A, to be filed with the Securities and Exchange Commission
on February 28, 1997, will, when issued, be validly issued, fully paid and
nonassessable.
For the record, it should be noted that I am an officer of American Century
Services Corporation, an affiliated corporation of American Century Investment
Management, Inc., the investment adviser of American Century Mutual Funds, Inc.
I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 76.
Very truly yours,
/s/Charles A. Etherington
Charles A. Etherington
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
American Century Mutual Funds, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
We hereby consent to the use in this Post-Effective Amendment No. 76 to the
Registration Statement under the Securities Act of 1933 and this Amendment No.
76 to the Registration Statement under the Investment Company Act of 1940, both
on form N-1A, of our report dated November 20, 1996, accompanying and pertaining
to the financial statements of Twentieth Century Investors, Inc., as of October
31, 1996, which are included in such Post-Effective Amendments.
/s/ BAIRD, KURTZ & DODSON
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
February 28, 1997
Schedule of Computation of Performance Advertising Quotations
A. Representative Total Return Calculations
Set forth below are representative calculations of each type of total
return performance quotation included in the Statement of Additional Information
of Twentieth Century Investors, Inc.
1. Average annual total return. The five year average annual
return of Growth Investors, as quoted in the Statement of Additional
Information, was 9.32%.
This return was calculated as follows:
P(1+T)n=ERV
where,
P = a hypothetical initial payment of $1,000 T = average annual total
return n = number of years ERV = ending redeemable value of the
hypothetical $1,000 payment at the end of 5 years.
Applying the actual return figures of Growth Investors for the 5 year
period ended October 31, 1996:
1,000 (1+9.32%)5 = $1,561.34
T = 1,561.34 1/5 - 1
--------
1,000.00
T = 9.32%
2. Cumulative total return. The cumulative total return of
Growth Investors from 6/30/71 to 10/31/96 as quoted in the Statement
of Additional Information, was 6,728.19%
This return was calculated as follows:
C = (ERV - P)
--------
P
where,
C = cumulative total return
<PAGE>
P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of the hypothetical
$1,000 payment at the end of the 25.3 year period
Applying the actual return figures of Growth Investors for the 25.3
year period ended October 31, 1996:
C = (68,281.90 - 1,000)
-------------------
1,000
C = 6,728.19%
B. Yield Calculations
Set forth below are representative calculations of each type of yield
quotation included in the Statement of Additional Information of Twentieth
Century Investors, Inc.
1. Cash Reserve Yield. The yield for Cash Reserve for the
current seven days ended October 31, 1996, as quoted in the Statement
of Additional Information, was 4.74%.
The yield was computed as follows:
Y = I x 365
--- ---
B 7
where,
Y = yield
I = total income of hypothetical account of one share over
seven day period
B = beginning account value ($1)
Applying the actual figures of Cash Reserve for the seven day period
ended October 31, 1996:
Y = .000908361 x 365
---------- ---
1 7
Y = 4.74%
Thirty-day yields are calculated similarly, with the appropriate
substitutions.
2. Cash Reserve Effective Yield. The effective yield for Cash
Reserve for the seven days ended October 31, 1996 as quoted in the
Statement of Additional Information, was 4.85%.
The effective yield was computed as follows:
( I ) 365/7
EF = (1 + ---) -1
( B )
where,
<PAGE>
EF - effective yield
I = total income of hypothetical account of one share over
seven day period
B = beginning account value ($1)
Applying the actual figures of Cash Reserve for the seven day period
ended October 31, 1996
EF = 1 + .000908361 365 - 1
---------- ---
1 7
EF = 4.85%
3. Other Fixed-Income Funds and the Balanced Fund Yield. The
yield for U.S. Governments for the thirty days ended October 31, 1996,
as quoted in the Statement of Additional Information, was 5.36%.
The yield was calculated as follows:
Y = a - b + 1 6 - 1 *2
-----
c*d
where,
Y = yield
a = total income during thirty day period
b = expense accrued for the period
c = average daily number of shares outstanding during the
period
d = maximum offering price per share on last day of period
Applying the actual figures of U.S. Governments for the thirty
day period ended October 31, 1996:
1,753,770.87 - 201,080.32 +1 6 - 1 *2
-------------------------
37,099,103.513 * 9.47
Y = 5.36%
4. Tax-Equivalent Yield. The tax-equivalent yield for
Tax-Exempt Intermediate Term for the thirty days ended October 31,
1995, as quoted in the Statement of Additional Information, was 6.58%.
The tax-equivalent yield was calculated as follows:
EY = Y - Yt
------ + Yt
1 - A
where,
EY = tax-equivalent yield Y = yield (as computed above) A = assumed tax
rate of 36%
Yt = portion of the yield that was not tax-exempt
Applying the actual figures of Tax-Exempt Intermediate Term
for the thirty days ended October 31, 1996:
EY = 4.34
------
1-.36
EY = 6.78%
Cumulative total return and average annual total return quotations for
the fixed-income funds (other than Cash Reserve) are calculated in the same
manner as cumulative total return and average annual total return quotations for
the Twentieth Century common stock funds and the Balanced Fund as described
under paragraphs A1 and A2 of this Schedule.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, American Century
Mutual Funds, Inc., hereinafter called the "Corporation", and certain directors
and officers of the Corporation, do hereby constitute and appoint James E.
Stowers, Jr., James E. Stowers III, William M. Lyons, and Patrick A. Looby, and
each of them individually, their true and lawful attorneys and agents to take
any and all action and execute any and all instruments which said attorneys and
agents may deem necessary or advisable to enable the Corporation to comply with
the Securities Act of 1933 and/or the Investment Company Act of 1940, as
amended, and any rules, regulations, orders, or other requirements of the United
States Securities and Exchange Commission thereunder, in connection with the
registration under the Securities Act of 1933 and/or the Investment Company Act
of 1940, as amended, including specifically, but without limitation of the
foregoing, power and authority to sign the name of the Corporation in its behalf
and to affix its corporate seal, and to sign the names of each of such directors
and officers in their capacities as indicated, to any amendment or supplement to
the Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and/or the Investment Company Act of 1940, as
amended, and to any instruments or documents filed or to be filed as a part of
or in connection with such Registration Statement; and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the Corporation has caused this Power to be
executed by its duly authorized officers on this the 15th day of February, 1997.
AMERICAN CENTURY MUTUAL FUNDS, INC.
By: /s/ James E. Stowers III
James E. Stowers III, President
SIGNATURE AND TITLE
/s/ James E. Stowers III /s/ Robert W. Doering, M.D.
James E. Stowers, Jr. Robert W. Doering, M.D.
Chairman and Director Director
/s/ James E. Stowers III /s/ Linsley L. Lundgaard
James E. Stowers III Linsley L. Lundgaard
President, Director and Director
Principal Executive Officer
/s/ Robert T. Jackson /s/ Donald H. Pratt
Robert T. Jackson Donald H. Pratt
Executive Vice President, Director
Principal Financial Officer
/s/ Maryanne Roepke /s/ Lloyd T. Silver
Maryanne Roepke Lloyd T. Silver
Vice President and Treasurer, Director
Principal Accounting Officer
/s/ Thomas A. Brown /s/ M. Jeannine Strandjord
Thomas A. Brown M. Jeannine Strandjord
Director Director
Attest: /s/ D.D. ("Del") Hock
D.D. ("Del") Hock
By: /s/ William M. Lyons Director
William M. Lyons, Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> GROWTH FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 3,678,206
<INVESTMENTS-AT-VALUE> 4,797,550
<RECEIVABLES> 28,830
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,826,380
<PAYABLE-FOR-SECURITIES> 29,978
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,978
<TOTAL-LIABILITIES> 60,956
<SENIOR-EQUITY> 2,145
<PAID-IN-CAPITAL-COMMON> 3,564,859
<SHARES-COMMON-STOCK> 214,526
<SHARES-COMMON-PRIOR> 214,805
<ACCUMULATED-NII-CURRENT> 38,410
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 40,665
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,119,345
<NET-ASSETS> 4,765,424
<DIVIDEND-INCOME> 37,661
<INTEREST-INCOME> 6,859
<OTHER-INCOME> 0
<EXPENSES-NET> 47,683
<NET-INVESTMENT-INCOME> (3,163)
<REALIZED-GAINS-CURRENT> 104,580
<APPREC-INCREASE-CURRENT> 253,622
<NET-CHANGE-FROM-OPS> 355,039
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,900
<DISTRIBUTIONS-OF-GAINS> 659,050
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,900
<NUMBER-OF-SHARES-REDEEMED> 69,582
<SHARES-REINVESTED> 34,403
<NET-CHANGE-IN-ASSETS> (364,470)
<ACCUMULATED-NII-PRIOR> 11,867
<ACCUMULATED-GAINS-PRIOR> 639,741
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 47,633
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 47,683
<AVERAGE-NET-ASSETS> 4,789,340
<PER-SHARE-NAV-BEGIN> 23.88
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 1.47
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> 3.06
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 22.21
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> SELECT FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 3,192,805
<INVESTMENTS-AT-VALUE> 4,051,704
<RECEIVABLES> 55,021
<ASSETS-OTHER> 1,540
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,108,265
<PAYABLE-FOR-SECURITIES> 58,595
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,991
<TOTAL-LIABILITIES> 69,586
<SENIOR-EQUITY> 973
<PAID-IN-CAPITAL-COMMON> 2,799,287
<SHARES-COMMON-STOCK> 97,279
<SHARES-COMMON-PRIOR> 101,434
<ACCUMULATED-NII-CURRENT> 28,576
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 350,596
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 859,247
<NET-ASSETS> 4,038,679
<DIVIDEND-INCOME> 54,279
<INTEREST-INCOME> 6,113
<OTHER-INCOME> 0
<EXPENSES-NET> 39,347
<NET-INVESTMENT-INCOME> 21,045
<REALIZED-GAINS-CURRENT> 364,952
<APPREC-INCREASE-CURRENT> 324,433
<NET-CHANGE-FROM-OPS> 710,430
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26,725
<DISTRIBUTIONS-OF-GAINS> 462,881
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,936
<NUMBER-OF-SHARES-REDEEMED> 28,464
<SHARES-REINVESTED> 13,373
<NET-CHANGE-IN-ASSETS> 30,241
<ACCUMULATED-NII-PRIOR> 20,688
<ACCUMULATED-GAINS-PRIOR> 462,093
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 39,305
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39,347
<AVERAGE-NET-ASSETS> 3,935,125
<PER-SHARE-NAV-BEGIN> 39.52
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 6.73
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 4.66
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 41.52
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUTAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL CLASSES,
EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATE). IN THOSE
CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> ULTRA FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996 <F1>
<INVESTMENTS-AT-COST> 12,355,552
<INVESTMENTS-AT-VALUE> 18,301,798
<RECEIVABLES> 125,087
<ASSETS-OTHER> 20,725
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,447,610
<PAYABLE-FOR-SECURITIES> 123,446
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,218
<TOTAL-LIABILITIES> 168,664
<SENIOR-EQUITY> 6,192
<PAID-IN-CAPITAL-COMMON> 11,314,849
<SHARES-COMMON-STOCK> 619,157
<SHARES-COMMON-PRIOR> 512,810
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,010,641
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,947,264
<NET-ASSETS> 18,278,946
<DIVIDEND-INCOME> 110,875
<INTEREST-INCOME> 20,035
<OTHER-INCOME> 0
<EXPENSES-NET> 162,378
<NET-INVESTMENT-INCOME> (31,468)
<REALIZED-GAINS-CURRENT> 1,037,212
<APPREC-INCREASE-CURRENT> 777,976
<NET-CHANGE-FROM-OPS> 1,783,720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 683,461 <F2>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 194,542
<NUMBER-OF-SHARES-REDEEMED> 114,977
<SHARES-REINVESTED> 26,782 <F2>
<NET-CHANGE-IN-ASSETS> 3,903,044
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 669,968
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162,208
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 162,378
<AVERAGE-NET-ASSETS> 16,286,748
<PER-SHARE-NAV-BEGIN> 28.03 <F2>
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 2.84 <F2>
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.30 <F2>
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 29.52 <F2>
<EXPENSE-RATIO> 1.00 <F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1>SCHEDULE REFLECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2>INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT. INFORMATION PRESENTED IS A TOTAL OF ALL CLASSES,
EXCEPT WHERE SUCH PRESENTATION IS NOT POSSIBLE(SUCH AS PER SHARE DATE). IN THOSE
CASES, ONLY THE INVESTOR CLASS INFORMATION IS PRESENTED.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> VISTA FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996 <F1>
<INVESTMENTS-AT-COST> 1,720,861
<INVESTMENTS-AT-VALUE> 2,256,493
<RECEIVABLES> 53,470
<ASSETS-OTHER> 7,927
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,317,890
<PAYABLE-FOR-SECURITIES> 29,605
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,807
<TOTAL-LIABILITIES> 36,412
<SENIOR-EQUITY> 1,455
<PAID-IN-CAPITAL-COMMON> 1,576,366
<SHARES-COMMON-STOCK> 145,535
<SHARES-COMMON-PRIOR> 106,542
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 168,024
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 535,633
<NET-ASSETS> 2,281,478
<DIVIDEND-INCOME> 305
<INTEREST-INCOME> 5,134
<OTHER-INCOME> 0
<EXPENSES-NET> 20,223
<NET-INVESTMENT-INCOME> (14,784)
<REALIZED-GAINS-CURRENT> 171,813
<APPREC-INCREASE-CURRENT> (24,182)
<NET-CHANGE-FROM-OPS> 132,847
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 113,264 <F2>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 92,737
<NUMBER-OF-SHARES-REDEEMED> 61,549
<SHARES-REINVESTED> 7,805 <F2>
<NET-CHANGE-IN-ASSETS> 605,561
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 467
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 20,223
<AVERAGE-NET-ASSETS> 2,041,214
<PER-SHARE-NAV-BEGIN> 15.73 <F2>
<PER-SHARE-NII> (0.13)
<PER-SHARE-GAIN-APPREC> 1.09 <F2>
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.03 <F2>
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.68 <F2>
<EXPENSE-RATIO> 0.99 <F2>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<FN>
<F1>SCHEDULE RELFECTS THE TOTAL FOR ALL CLASSES, EXCEPT WHERE INDICATED.
<F2>INVESTOR CLASS INFORMATION ONLY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> GIFTRUST - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 663,441
<INVESTMENTS-AT-VALUE> 860,048
<RECEIVABLES> 14,044
<ASSETS-OTHER> 455
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 874,547
<PAYABLE-FOR-SECURITIES> 7,958
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 839
<TOTAL-LIABILITIES> 8,797
<SENIOR-EQUITY> 336
<PAID-IN-CAPITAL-COMMON> 642,866
<SHARES-COMMON-STOCK> 33,572
<SHARES-COMMON-PRIOR> 21,896
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25,941
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 196,607
<NET-ASSETS> 865,750
<DIVIDEND-INCOME> 18
<INTEREST-INCOME> 1,413
<OTHER-INCOME> 0
<EXPENSES-NET> 7,170
<NET-INVESTMENT-INCOME> (5,739)
<REALIZED-GAINS-CURRENT> 25,992
<APPREC-INCREASE-CURRENT> 51,469
<NET-CHANGE-FROM-OPS> 71,722
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 48,106
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,014
<NUMBER-OF-SHARES-REDEEMED> 413
<SHARES-REINVESTED> 2,075
<NET-CHANGE-IN-ASSETS> 304,638
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 48,055
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,170
<AVERAGE-NET-ASSETS> 731,222
<PER-SHARE-NAV-BEGIN> 25.63
<PER-SHARE-NII> (0.20)
<PER-SHARE-GAIN-APPREC> 2.46
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 2.10
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 25.79
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> SHORT-TERM GOVERNMENT FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 345,317
<INVESTMENTS-AT-VALUE> 347,730
<RECEIVABLES> 3,822
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 351,552
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,780
<TOTAL-LIABILITIES> 1,780
<SENIOR-EQUITY> 369
<PAID-IN-CAPITAL-COMMON> 366,948
<SHARES-COMMON-STOCK> 36,941
<SHARES-COMMON-PRIOR> 41,168
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (19,958)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,413
<NET-ASSETS> 349,772
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,514
<OTHER-INCOME> 0
<EXPENSES-NET> 2,574
<NET-INVESTMENT-INCOME> 19,940
<REALIZED-GAINS-CURRENT> (339)
<APPREC-INCREASE-CURRENT> (1,269)
<NET-CHANGE-FROM-OPS> 18,332
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,940
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,327
<NUMBER-OF-SHARES-REDEEMED> 14,531
<SHARES-REINVESTED> 1,977
<NET-CHANGE-IN-ASSETS> (41,559)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (19,619)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,570
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,574
<AVERAGE-NET-ASSETS> 370,207
<PER-SHARE-NAV-BEGIN> 9.51
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> 0.51
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.47
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> CASH RESERVE FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,367,543
<INVESTMENTS-AT-VALUE> 1,367,543
<RECEIVABLES> 4,426
<ASSETS-OTHER> 237
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,372,206
<PAYABLE-FOR-SECURITIES> 14,994
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,112
<TOTAL-LIABILITIES> 25,106
<SENIOR-EQUITY> 13,472
<PAID-IN-CAPITAL-COMMON> 1,333,706
<SHARES-COMMON-STOCK> 1,347,178
<SHARES-COMMON-PRIOR> 1,469,626
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (78)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,347,100
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 76,713
<OTHER-INCOME> 0
<EXPENSES-NET> 9,609
<NET-INVESTMENT-INCOME> 67,104
<REALIZED-GAINS-CURRENT> 2
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 67,106
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 67,104
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,137,139
<NUMBER-OF-SHARES-REDEEMED> 2,324,195
<SHARES-REINVESTED> 64,608
<NET-CHANGE-IN-ASSETS> (122,448)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,594
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,609
<AVERAGE-NET-ASSETS> 1,375,449
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> BENHAM BOND FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 136,320
<INVESTMENTS-AT-VALUE> 138,317
<RECEIVABLES> 4,957
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,274
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 707
<TOTAL-LIABILITIES> 707
<SENIOR-EQUITY> 148
<PAID-IN-CAPITAL-COMMON> 139,118
<SHARES-COMMON-STOCK> 14,801
<SHARES-COMMON-PRIOR> 15,251
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,304
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,997
<NET-ASSETS> 142,567
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,174
<OTHER-INCOME> 0
<EXPENSES-NET> 1,150
<NET-INVESTMENT-INCOME> 9,024
<REALIZED-GAINS-CURRENT> 1,341
<APPREC-INCREASE-CURRENT> (3,546)
<NET-CHANGE-FROM-OPS> 6,819
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,024
<DISTRIBUTIONS-OF-GAINS> 228
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,596
<NUMBER-OF-SHARES-REDEEMED> 7,937
<SHARES-REINVESTED> 891
<NET-CHANGE-IN-ASSETS> (6,656)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 191
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,148
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,150
<AVERAGE-NET-ASSETS> 146,072
<PER-SHARE-NAV-BEGIN> 9.78
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> (0.14)
<PER-SHARE-DIVIDEND> 0.60
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.63
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> BENHAM INTERMEDIATE-TERM TAX-EXEMPT - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 77,976
<INVESTMENTS-AT-VALUE> 79,959
<RECEIVABLES> 1,333
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81,292
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 724
<TOTAL-LIABILITIES> 724
<SENIOR-EQUITY> 78
<PAID-IN-CAPITAL-COMMON> 78,323
<SHARES-COMMON-STOCK> 7,788
<SHARES-COMMON-PRIOR> 7,677
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 184
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,983
<NET-ASSETS> 80,568
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,273
<OTHER-INCOME> 0
<EXPENSES-NET> 486
<NET-INVESTMENT-INCOME> 3,787
<REALIZED-GAINS-CURRENT> 185
<APPREC-INCREASE-CURRENT> (538)
<NET-CHANGE-FROM-OPS> 3,434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,787
<DISTRIBUTIONS-OF-GAINS> 549
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,701
<NUMBER-OF-SHARES-REDEEMED> 1,949
<SHARES-REINVESTED> 359
<NET-CHANGE-IN-ASSETS> 320
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 548
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 485
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 486
<AVERAGE-NET-ASSETS> 81,297
<PER-SHARE-NAV-BEGIN> 10.45
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 0.07
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.35
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> LONG-TERM TAX-EXEMPT FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 57,253
<INVESTMENTS-AT-VALUE> 60,223
<RECEIVABLES> 1,023
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61,246
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 474
<TOTAL-LIABILITIES> 474
<SENIOR-EQUITY> 57
<PAID-IN-CAPITAL-COMMON> 57,745
<SHARES-COMMON-STOCK> 5,744
<SHARES-COMMON-PRIOR> 5,503
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,970
<NET-ASSETS> 60,772
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,361
<OTHER-INCOME> 0
<EXPENSES-NET> 354
<NET-INVESTMENT-INCOME> 3,007
<REALIZED-GAINS-CURRENT> 27
<APPREC-INCREASE-CURRENT> 134
<NET-CHANGE-FROM-OPS> 3,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,007
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,920
<NUMBER-OF-SHARES-REDEEMED> 1,925
<SHARES-REINVESTED> 245
<NET-CHANGE-IN-ASSETS> 2,775
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (27)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 353
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 354
<AVERAGE-NET-ASSETS> 59,479
<PER-SHARE-NAV-BEGIN> 10.54
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.04
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.58
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> HERITAGE FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 874,929
<INVESTMENTS-AT-VALUE> 1,091,552
<RECEIVABLES> 6,536
<ASSETS-OTHER> 1,219
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,099,307
<PAYABLE-FOR-SECURITIES> 13,011
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,145
<TOTAL-LIABILITIES> 16,156
<SENIOR-EQUITY> 885
<PAID-IN-CAPITAL-COMMON> 797,806
<SHARES-COMMON-STOCK> 88,484
<SHARES-COMMON-PRIOR> 85,837
<ACCUMULATED-NII-CURRENT> 7,938
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 59,758
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 216,764
<NET-ASSETS> 1,083,151
<DIVIDEND-INCOME> 8,549
<INTEREST-INCOME> 1,910
<OTHER-INCOME> 0
<EXPENSES-NET> 10,584
<NET-INVESTMENT-INCOME> (125)
<REALIZED-GAINS-CURRENT> 69,544
<APPREC-INCREASE-CURRENT> 34,728
<NET-CHANGE-FROM-OPS> 104,147
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,182
<DISTRIBUTIONS-OF-GAINS> 53,228
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,820
<NUMBER-OF-SHARES-REDEEMED> 25,302
<SHARES-REINVESTED> 5,129
<NET-CHANGE-IN-ASSETS> 74,828
<ACCUMULATED-NII-PRIOR> 3,755
<ACCUMULATED-GAINS-PRIOR> 51,932
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,573
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,584
<AVERAGE-NET-ASSETS> 1,065,352
<PER-SHARE-NAV-BEGIN> 11.75
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 1.15
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.61
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.24
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> BALANCED FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 742,244
<INVESTMENTS-AT-VALUE> 863,690
<RECEIVABLES> 58,164
<ASSETS-OTHER> 3,279
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 925,133
<PAYABLE-FOR-SECURITIES> 39,990
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,975
<TOTAL-LIABILITIES> 45,965
<SENIOR-EQUITY> 474
<PAID-IN-CAPITAL-COMMON> 689,723
<SHARES-COMMON-STOCK> 47,404
<SHARES-COMMON-PRIOR> 46,083
<ACCUMULATED-NII-CURRENT> 2,912
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 64,614
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 121,445
<NET-ASSETS> 879,168
<DIVIDEND-INCOME> 5,264
<INTEREST-INCOME> 24,471
<OTHER-INCOME> 0
<EXPENSES-NET> 8,354
<NET-INVESTMENT-INCOME> 21,381
<REALIZED-GAINS-CURRENT> 66,241
<APPREC-INCREASE-CURRENT> 24,176
<NET-CHANGE-FROM-OPS> 111,798
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 21,812
<DISTRIBUTIONS-OF-GAINS> 46,792
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,553
<NUMBER-OF-SHARES-REDEEMED> 14,226
<SHARES-REINVESTED> 3,994
<NET-CHANGE-IN-ASSETS> 63,598
<ACCUMULATED-NII-PRIOR> 2,054
<ACCUMULATED-GAINS-PRIOR> 46,454
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,345
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,354
<AVERAGE-NET-ASSETS> 844,937
<PER-SHARE-NAV-BEGIN> 17.70
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 1.88
<PER-SHARE-DIVIDEND> 0.46
<PER-SHARE-DISTRIBUTIONS> 1.01
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.55
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 13
<NAME> BENHAM LIMITED-TERM TAX-EXEMPT FUND - 1996
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 51,197
<INVESTMENTS-AT-VALUE> 51,590
<RECEIVABLES> 815
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,405
<PAYABLE-FOR-SECURITIES> 2,020
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 519
<TOTAL-LIABILITIES> 2,539
<SENIOR-EQUITY> 49
<PAID-IN-CAPITAL-COMMON> 49,408
<SHARES-COMMON-STOCK> 4,949
<SHARES-COMMON-PRIOR> 5,829
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 393
<NET-ASSETS> 49,866
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,513
<OTHER-INCOME> 0
<EXPENSES-NET> 207
<NET-INVESTMENT-INCOME> 2,306
<REALIZED-GAINS-CURRENT> 23
<APPREC-INCREASE-CURRENT> (100)
<NET-CHANGE-FROM-OPS> 2,229
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,306
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,064
<NUMBER-OF-SHARES-REDEEMED> 3,148
<SHARES-REINVESTED> 204
<NET-CHANGE-IN-ASSETS> (8,971)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 321
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 207
<AVERAGE-NET-ASSETS> 53,836
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> 0.43
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.08
<EXPENSE-RATIO> 0.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 14
<NAME> BENHAM LIMITED-TERM BOND FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 7,974
<INVESTMENTS-AT-VALUE> 8,026
<RECEIVABLES> 91
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,117
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25
<TOTAL-LIABILITIES> 25
<SENIOR-EQUITY> 8
<PAID-IN-CAPITAL-COMMON> 8,030
<SHARES-COMMON-STOCK> 815
<SHARES-COMMON-PRIOR> 722
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 52
<NET-ASSETS> 8,092
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 484
<OTHER-INCOME> 0
<EXPENSES-NET> 52
<NET-INVESTMENT-INCOME> 432
<REALIZED-GAINS-CURRENT> 13
<APPREC-INCREASE-CURRENT> (31)
<NET-CHANGE-FROM-OPS> 414
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 432
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 300
<NUMBER-OF-SHARES-REDEEMED> 249
<SHARES-REINVESTED> 42
<NET-CHANGE-IN-ASSETS> 899
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (11)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 52
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52
<AVERAGE-NET-ASSETS> 7,681
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 15
<NAME> INTERMEDIATE-TERM BOND FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 15,402
<INVESTMENTS-AT-VALUE> 15,478
<RECEIVABLES> 482
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,960
<PAYABLE-FOR-SECURITIES> 260
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74
<TOTAL-LIABILITIES> 334
<SENIOR-EQUITY> 16
<PAID-IN-CAPITAL-COMMON> 15,539
<SHARES-COMMON-STOCK> 1,577
<SHARES-COMMON-PRIOR> 1,274
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 76
<NET-ASSETS> 15,626
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 983
<OTHER-INCOME> 0
<EXPENSES-NET> 109
<NET-INVESTMENT-INCOME> 874
<REALIZED-GAINS-CURRENT> (4)
<APPREC-INCREASE-CURRENT> (131)
<NET-CHANGE-FROM-OPS> 739
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 874
<DISTRIBUTIONS-OF-GAINS> 132
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,005
<NUMBER-OF-SHARES-REDEEMED> 792
<SHARES-REINVESTED> 90
<NET-CHANGE-IN-ASSETS> 2,799
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 131
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 109
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109
<AVERAGE-NET-ASSETS> 14,807
<PER-SHARE-NAV-BEGIN> 10.07
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> 0.58
<PER-SHARE-DISTRIBUTIONS> 0.10
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.91
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 16
<NAME> BENHAM INT-TERM GOVERNMENT FUND - 1996 PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 24,380
<INVESTMENTS-AT-VALUE> 24,214
<RECEIVABLES> 331
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 24,545
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 123
<TOTAL-LIABILITIES> 123
<SENIOR-EQUITY> 25
<PAID-IN-CAPITAL-COMMON> 24,226
<SHARES-COMMON-STOCK> 2,481
<SHARES-COMMON-PRIOR> 2,190
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 337
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (166)
<NET-ASSETS> 24,422
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,511
<OTHER-INCOME> 0
<EXPENSES-NET> 180
<NET-INVESTMENT-INCOME> 1,331
<REALIZED-GAINS-CURRENT> 338
<APPREC-INCREASE-CURRENT> (720)
<NET-CHANGE-FROM-OPS> 949
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,331
<DISTRIBUTIONS-OF-GAINS> 131
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,025
<NUMBER-OF-SHARES-REDEEMED> 1,877
<SHARES-REINVESTED> 143
<NET-CHANGE-IN-ASSETS> 2,441
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 130
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 180
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 180
<AVERAGE-NET-ASSETS> 24,216
<PER-SHARE-NAV-BEGIN> 10.04
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> (0.14)
<PER-SHARE-DIVIDEND> 0.54
<PER-SHARE-DISTRIBUTIONS> 0.06
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.84
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 17
<NAME> NEW OPPORTUNITIES
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 119,093,317
<INVESTMENTS-AT-VALUE> 119,847,813
<RECEIVABLES> 126,575
<ASSETS-OTHER> 5,029,586
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</TABLE>