AMERICAN CENTURY MUTUAL FUNDS, INC.
PROSPECTUS SUPPLEMENT
American Century Balanced
Investor Class * Institutional Class * Advisor Class
SUPPLEMENT DATED AUGUST 25, 1998
Prospectus dated March 1, 1998
Effective November 1, 1998, American Century Balanced Fund will modify the way
the equity portion of the fund is managed. Historically, investments for the
equity part of Balanced, which comprise about 60% of the fund's assets, have
been guided by a growth investment strategy developed by American Century. This
led the fund's equity assets to be invested in companies with earnings and
revenues that are growing at an accelerating pace.
In order to decrease the volatility potential of its equity portfolio, effective
November 1, 1998, equity investments will be guided by our quantitative equity
management style. Accordingly, as of November 1, 1998, the disclosure set forth
below will replace the two paragraphs under the heading "Equity Investments" on
page 6 of the Investor Class and Institutional Class Prospectuses and page 7 of
the Advisor Class Prospectus.
With the equity portion of the Balanced portfolio, the manager utilizes
quantitative management techniques in a two-step process that draws heavily on
computer technology. In the first step, the manager ranks stocks, primarily the
1,500 largest publicly traded companies in the United States (measured by the
value of their stock). These rankings are determined by using a computer model
that combines measures of a stock's value, as well as measures of its growth
potential. To measure value, the manager uses ratios of stock price to book
value and stock price to cash flow, among others. To measure growth, the manager
uses, among others, the rate of growth of a company's earnings and changes in
the earnings estimates for a company.
In the second step, the manager uses a technique called portfolio
optimization. In portfolio optimization, the manager uses a computer to build a
portfolio of stocks from the ranking described earlier that it thinks will
provide the optimal balance between risk and expected return. The goal is to
create an equity portfolio that provides better returns than the S&P 500 without
taking on significant additional risk.
In this change of guiding style, the portfolio management team responsible for
the equity portion of Balanced will change. The team managing the fixed income
portion will not change. To reflect the management team changes, as of November
1, 1998, the following disclosure will replace paragraphs 4 through 6 under the
heading "Investment Manager" on page 22 of the Investor Class Prospectus, page
21 of the Institutional Class Prospectus and page 18 of the Advisor Class
Prospectus.
JOHN SCHNIEDWIND, Senior Vice President and Group Leader - Quantitative
Equity, joined American Century in 1982. He is a member of the team that manages
the equity portion of Balanced.
JEFFREY R. TYLER, Senior Vice President and Portfolio Manager, joined
American Century in January 1988. He is a member of the team that manages the
equity portion of Balanced.
The following new section is added after the section "Transfer and
Administrative Services" on page 23 of the Investor Class Prospectus, page 22 of
the Institutional Class Prospectus and page 19 of the Advisor Class Prospectus.
YEAR 2000 ISSUES
Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. Because
this may impact the computer systems of various American Century-affiliated and
external service providers for the funds, American Century formally initiated a
Year 2000 readiness project in July 1997. It involves a team of information
technology professionals assisted by outside consultants and guided by a
senior-level steering committee. The team's goal is to assess the impact of the
Year 2000 on American Century's systems, renovate or replace noncompliant
critical systems and test those systems. In addition, the team has been working
to gather information about the Year 2000 efforts of the fund's other major
service providers. Although American Century believes its critical systems will
function properly in the Year 2000, this is not guaranteed. If the efforts of
American Century or its external service providers are not successful, the
fund's business, particularly its ability to provide shareholder services, may
be hampered.
In addition, the issuers of securities the fund owns could have Year 2000
computer problems. These problems could negatively affect the value of its
securities, which, in turn, could impact the fund's performance. The manager has
established a process to gather publicly available information about the Year
2000 readiness of these issuers. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors
the manager may consider when making investment decisions, and other factors may
receive greater weight.
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American
Century
P.O. Box 419200
Kansas City, Missouri
64141-6200
1-800-345-2021 or 816-531-5575
SH-SPL-13774 9808
