SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 85 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 85 [X]
(Check appropriate box or boxes.)
AMERICAN CENTURY MUTUAL FUNDS, INC.
_________________________________________________________________
(Exact Name of Registrant as Specified in Charter)
4500 Main Street, Kansas City, MO 64141-6200
_________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 531-5575
David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64111
_________________________________________________________________
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: November 14, 1999
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
American Century
Prospectus
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AC Fund
AC Large-Cap Fund
INVESTOR CLASS
NOVEMBER 14, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC.
Dear Investor,
Reading a prospectus doesn't have to be a chore. We've done the hard work so
you can focus on what's important--learning about the funds and tracking your
investments. Take a look inside, and you'll see this prospectus is different. It
takes a clear-cut approach to fund information.
Here's what you'll find:
o The funds' primary investments and risks
o A description of who may or may not want to invest in the funds
o An overview of services available and ways to manage your accounts
o Helpful tips and definitions of key investment terms
Whether you're a current investor or investing in mutual funds for the first
time, this prospectus will give you a clear understanding of the funds. If you
have questions, our Investor Relations Representatives are available weekdays 7
a.m. to 7 p.m. and Saturdays 9 a.m. to 2 p.m. Central time. Our toll-free number
is 1-800-345-2021. We look forward to helping you achieve your financial goals.
Sincerely,
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
Table of Contents
An Overview of the Funds.......................................................2
Fund Performance History.......................................................3
Fees and Expenses..............................................................4
Information about the Funds
AC Fund
AC Large-Cap Fund..............................................................5
Management.....................................................................7
Investing with American Century...............................................XX
Share Price and Distributions.................................................XX
Taxes.........................................................................XX
Multiple Class Information....................................................XX
CALLOUT
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in green italics, look for its definition
in the left margin.
This symbol highlights special information and helpful tips.
An Overview of the Funds
What are the funds' investment objectives? These funds seek long-term capital
growth.
What are the funds' primary investment strategies and principal risks? The funds
use a systematic, highly-automated approach to common stock investing. This
approach is designed to identify companies that are growing and whose share
price patterns suggest their stocks are likely to increase in value. A more
detailed description of the funds' investment style begins on page __. The
funds' principal risks include
o High Turnover - The funds'portfolio turnover may be very high. This could
result in relatively high commission costs and capital gains tax liabilities
for the funds and their shareholders, which may hurt the funds' performance.
o Market Risk - The value of a fund's shares will go up and down based on the
performance of the companies whose securities it owns and other factors
affecting the securities market generally.
o Price Volatility - The value of the funds' shares may fluctuate
significantly in the short term.
o Principal Loss - As with all mutual funds, if you sell your shares when
their value is less than the price you paid, you will lose money.
o Nondiversification - From time to time, the funds may pursue investment
opportunities that cause them to become temporarily nondiversified. In a
nondiversified fund, a price change in a single security may have a greater
impact on the fund's share price than would be the case in a diversified
fund.
Who may want to invest in the funds?
The funds may be a good investment if you are
o seeking long-term capital growth from your investment
o comfortable with the funds' short-term price volatility
o comfortable with the risks associated with the funds' investment strategy
o investing through an IRA or other tax-advantaged retirement plan
Who may not want to invest in the funds?
The funds may not be a good investment if you are
o seeking current income from your investment
o investing for a short period of time
o uncomfortable with short-term volatility in the value of your investment
CALLOUT
Portfolio turnover is a measure of how frequently a fund buys and sells
portfolio securities.
CALLOUT
A nondiversified fund may invest a greater percentage of its assets in a
particular portfolio security than may a diversified fund.
CALLOUT
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Fund Performance History
As new funds, the funds' performance history is not available as of the date of
this Prospectus.
CALLOUT
For current performance information, please call us at 1-800-345-2021 or visit
American Century's Web site at www.americancentury.com.
Fees and Expenses
There are no sales loads, fees or other charges
o to buy fund shares directly from American Century
o to reinvest dividends in additional shares
The following table describes the fees and expenses that you will pay if you buy
and hold shares of the funds.
Shareholder Transaction Expenses (fees paid directly from your investment)
Redemption/Exchange Fee(as a percentage
of amount redeemed/exchanged)
Shares held for less than five years (1) 2.0%
Shares held for five years or more None
1 The fee withheld from redemption/exchange proceeds is retained by the fund.
<TABLE>
Annual Operating Expenses (expenses that are deducted from fund assets)
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses(1) Operating Expenses
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<S> <C> <C> <C> <C>
AC Fund 1.50% None 0.00% 1.50%
AC Large-Cap 1.35% None 0.00% 1.35%
</TABLE>
1 Other expenses, which include the fees and expenses of the funds'
independent directors, their legal counsel and interest, are expected to be
less than 0.005% for the current fiscal year.
Example
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you ...
o invest $10,000 in the fund
o redeem all of your shares at the end of the periods shown below
o earn a 5% return each year
o incur the same operating expenses as shown above
... your cost of investing in the fund would be:
1 year 3 years
AC Fund $359 $693
AC Large-Cap $344 $648
You would pay the following expenses if you did not redeem your shares:
1 year 3 years
AC Fund $152 $472
AC Large-Cap $137 $426
CALLOUT
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
Information about the Funds
AC Fund
AC Large-Cap Fund
What are the funds' investment objectives?
These funds seek long-term capital growth.
How do the funds pursue their investment objectives?
The funds use a systematic, highly-automated approach to common stock investing
developed by American Century. This approach relies heavily on quantitative
tools to identify attractive investment opportunities on a disciplined,
consistent basis. It utilizes a fundamental screening process to identify
attractive companies and a technical signal generator to determine optimum buy
and sell points based on a stock's historical price trends.
The quantitative tools used to identify attractive companies do so by screening
thousands of publicly traded securities to identify those that are growing. The
methodology identifies companies whose earnings and revenues are growing at a
successively faster, or accelerating, pace.
A second portion of the methodology attempts to identify companies whose share
price patterns suggest that they are likely to either rise or fall in price
(commonly referred to as technical analysis). This process is particularly
oriented to identifying attractive price patterns for companies demonstrating
the accelerating growth described above. These would be candidates for purchase.
Conversely, companies whose share price patterns suggest they are likely to
decline in price would be candidates for sale, if owned by the fund. On
occasion, the process may look favorably on share price patterns that appear
attractive even though the earnings of the underlying company are not growing at
an accelerating rate.
Although the funds are expected to invest primarily in U.S. companies, there is
no limit on the amount of assets the funds can invest in foreign companies.
Investments in foreign securities present some unique risks that are more fully
described in the funds' Statement of Additional Information.
The fund managers do not attempt to time the market. Instead, they intend to
keep the funds essentially fully invested in stocks regardless of the movement
of stock prices generally. However, in the fund managers' discretion, the funds
may invest up to 100% of their assets in U.S. government securities if the
funds' investment methodology fails to generate sufficient investment ideas or
to respond to adverse market, economic, political or other conditions. The funds
may not achieve their investment objectives while taking such a temporary
defensive position. When the managers believe that it is prudent, the funds also
may invest a portion of their assets in convertible securities, short-term
instruments, and non-leveraged futures and options. Futures and options can help
the funds' cash assets remain liquid while performing more like stocks. The
funds have a policy governing futures and options and similar derivative
securities to help manage the risk of these types of investments. A complete
description of the derivatives policy is included in the Statement of Additional
Information.
CALLOUT
Accelerating growth is shown, for example, by growth that is faster this quarter
than last or faster this year than the year before.
CALLOUT
Non-leveraged means that the fund may not invest in futures contracts where it
would be possible to lose more than the fund invested.
What kinds of securities do the funds buy?
The funds will usually purchase common stocks of U.S. and foreign companies, but
they can purchase other types of securities as well, such as domestic and
foreign preferred stocks, convertible securities, equity equivalent securities,
notes, bonds and other debt securities. The funds limit their purchase of debt
securities to investment-grade obligations.
What are the differences between the funds?
AC Large-Cap generally invests in larger companies. Companies considered to be
large generally have a market capitalization in excess of $5 billion. AC Fund,
by contrast, may invest in companies of any size.
What are the primary risks of investing in the funds?
The process driving the funds is specifically designed to respond quickly to
changing stock market conditions. As a result, the funds' portfolio turnover may
be significantly higher than that of many other funds. This heavy turnover,
perhaps as much as 200-300% per year or more, could result in relatively high
commission costs, substantial capital gain realizations for the funds, and
capital gains tax liabilities for the funds' shareholders.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
The fund managers may buy a large amount of a company's stock quickly, and often
will dispose of it quickly if the company's earnings or revenues decline. While
the managers believe this strategy provides substantial appreciation potential
over the long term, in the short term it can create a significant amount of
share price volatility. This volatility can be greater than that of the average
stock fund.
As with all funds, at any given time the value of your shares may be worth more
or less than the price you paid. If you sell your shares when the value is less
than the price you paid, you will lose money.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the funds' style, the funds' gains may not be as big as, or their losses may be
bigger than, other equity funds using different investment styles.
Although the fund managers intend to invest the funds' assets primarily in U.S.
stocks, the funds may invest in securities of foreign companies. To the extent a
fund invests in foreign securities, the overall risk of the fund could be
affected. Foreign securities can have certain unique risks, including
fluctuations in currency exchange rates, less stable political and economic
structures, reduced availability of public information, and lack of uniform
financial reporting and regulatory practices similar to those that apply in the
United States. These factors make investing in foreign securities generally
riskier than investing in U.S. stocks.
CALLOUT
Market capitalization is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share.
Management
Who manages the funds?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.
The Board of Directors
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor.
The Investment Advisor
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provides to the funds, the advisor receives a unified
management fee of 1.50% of the average net assets of the Investor Class shares
of AC Fund and 1.35% of the average net assets of the Investor Class shares of
AC Large-Cap. The amount of the management fee is calculated on a class-by-class
basis daily and paid monthly.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor pays all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent directors (including legal
counsel fees), and extraordinary expenses. A portion of the management fee may
be paid by the funds' advisor to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor.
The Fund Management Teams
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.
The portfolio managers on the investment teams are identified below:
James E. Stowers III
Mr. Stowers, Chief Executive Officer and Portfolio Manager, has been a member of
the team that manages the funds since their inception in November 1999. He also
is the Chief Investment Officer-U.S. Growth Equities and as such oversees the
investment discipline used by the funds and seven other growth funds. He joined
American Century in 1981. He has a bachelor's degree in finance from Arizona
State University.
John Small Jr.
Mr. Small, Portfolio Manager, has been a member of the team that manages the
funds since their inception in November 1999. He was promoted to Portfolio
Manager in February 1999. Since 1994 he has worked as an analyst and Portfolio
Manager for the Ultra fund. He joined American Century in May 1991. He has more
than 20 years experience with the U.S. Air Force. He has a bachelor's degree
from Rockford College and a master's degree in laser optics physics from the Air
Force Institute of Technology. He also has an MBA from Baker University.
CALLOUT
Code of Ethics
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or from profiting from the purchase and sale of the same security within 60
calendar days. In addition, the Code of Ethics requires portfolio managers and
other employees with access to information about the purchase or sale of
securities by the funds to obtain approval before executing permitted personal
trades.
Fundamental Investment Policies
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Directors may change any other policies
and investment strategies.
Year 2000 Issues
Many of the world's computer systems were originally programmed in a way that
prevented them from properly recognizing or processing 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 funds' 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 funds' business,
particularly the provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds own could have Year 2000
computer problems. Foreign issuers, especially those in emerging markets, may be
more susceptible to such problems than U.S. issuers. These problems could
negatively affect the value of the issuers' securities, which, in turn, could
impact the funds' performance. The advisor 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 fund managers may consider
when making investment decisions, and other factors may receive greater weight.
Investing With American Century
Services Automatically Available to You
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see "Conducting Business in
Writing" below.
Conducting Business in Writing
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
<TABLE>
<CAPTION>
Ways to Manage Your Account
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<S> <C> <C>
By telephone Open an account Make additional investments
Investor Relations If you are a current investor, you can open Call us or use our Automated Information Line
1-800-345-2021 an account by exchanging shares from another if you have authorized us to invest from your
American Century account. bank account.
Business, Not-For-Profit
and Employer-Sponsored Exchange shares Sell shares
Retirement Plans Call us or use our Automated Information Call an Investor Relations Representative.
1-800-345-3533 Line if you have authorized us to accept
telephone instructions.
Automated Information Line
1-800-345-8765
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By mail or fax Open an account Make additional investments
P.O. Box 419200 Send a signed, completed application and Send us your check or money order for at
Kansas City, MO 64141-6200 check or money order payable to American least $50 with an investment slip or $250
Century Investments. without an investment slip. If you don't have
Fax an investment slip, include your name,
816-340-7962 Exchange shares address and account number on your check or
Send us written instructions to exchange money order.
your shares from one American Century
account to another. Sell shares
Send us written instructions or a redemption
form to sell shares. Call an Investor
Relations Representative to request a form.
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Online Open an account Make additional investments
www.americancentury.com If you are a current investor, you can open Make an additional investment into an
an account by exchanging shares from another established American Century account if you
American Century account. have authorized us to invest from your bank
account.
Exchange shares
Exchange shares from another American Sell shares
Century account. Not available.
A Note about Mailings to Shareholders
To reduce expenses and demonstrate respect for our environment, we will deliver
most financial reports, prospectuses and account statements to households in a
single envelope, even if the accounts are registered under different names. If
you would like additional copies of financial reports and prospectuses or
separate mailing of account statements, please call us.
Your Guide to Services and Policies
When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the funds and the transfer agent.
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By wire Open an account Make additional investments
Call us to set up your account or mail a Follow the wire instructions provided in the
completed application to the address provided "Open an account" section.
in the "By Mail" section and give your bank
the following information. Sell shares
Our bank information: You can receive redemption proceeds by wire
Please remember that if you Commerce Bank N.A. or electronic transfer.
request redemptions by wire, Routing No. 101000019
$10 will be deducted from the Account No. 2804918
amount redeemed. Your bank The fund name
also may charge a fee. Your American Century account number*
Your name Exchange shares
The contribution year (for IRAs only) Not available.
*For additional investments only
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Automatically Open an account Make additional investments
Not available. With the automatic investment privilege, you
can purchase shares on a regular basis. You
Exchange shares must invest at least $600 per year per
Send us written instructions to set up an account.
automatic exchange of your shares from one
American Century account to another. Sell shares
If you have at least $10,000 in your account,
you may sell shares automatically by
establishing Check-A-Month or Automatic
Redemption plans.
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In person If you prefer to handle your transactions in person, visit one of our Investor Centers and a
representative can help you open an account, make additional investments and sell or exchange
shares.
4500 Main St. 4917 Town Center Drive
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5:30 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday
1665 Charleston Road 9445 East County Line Road, Suite A
Mountain View, California Englewood, Colorado
8 a.m. to 5 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday
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Minimum Initial Investment Amount
To open an account, the minimum investment is $10,000
Redemption of Shares in Low-Balance Accounts
If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.
Abusive Trading Practices
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
Special Requirements for Large Redemptions
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities selected by the fund managers, in
the same manner as we do in computing the fund's net asset value. We may provide
these securities in lieu of cash 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.
Investing through Financial Intermediaries
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
o minimum investment requirements
o exchange policies
o fund choices
o cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
those intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.
CALLOUT
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
Share Price and Distributions
Share Price
American Century determines the net asset value (NAV) of the funds as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is not open
(including certain U.S. holidays), we do not calculate the NAV. The NAV of a
fund share is the current value of the fund's assets, minus any liabilities,
divided by the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets may take place on weekends or holidays when a fund's NAV is not
calculated. So, the value of a fund's portfolio may be affected on days when you
can't purchase or redeem shares of the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
Distributions
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the funds will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as capital gains realized on
the sale of investment securities. Each fund generally pays distributions from
net income and capital gains, if any, once a year in December. They may make
more frequent distributions if necessary to comply with Internal Revenue Code
provisions.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distributions received
with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.
CALLOUTS
The net asset value of a fund is the price of the fund's shares.
Capital gains are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.
Taxes
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
sales by you of fund shares may cause you to be taxed.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
<TABLE>
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or above
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<S> <C> <C>
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them in cash. American Century will send you the tax
status of fund distributions for each calendar year in an annual tax mailing
(Form 1099-DIV) from the fund.
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
Taxes on Transactions
Your redemptions -- including exchanges to other American Century funds -- are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. 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
gains to you with respect to such shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes. If you have not certified to us that
your Social Security number or tax identification number is correct and that you
are not subject to 31% withholding, we are required to withhold and remit 31% of
dividends, capital gains distributions and redemptions to the IRS.
CALLOUT
Buying a Dividend
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
Multiple Class Information
American Century offers three classes of the funds: Investor Class,
Institutional Class and Advisor Class. The shares offered by this Prospectus are
Investor Class shares and have no up-front or deferred charges, commissions or
12b-1 fees.
American Century offers the other classes of shares primarily to institutional
investors through institutional distribution channels, such as
employer-sponsored retirement plans, or through banks, broker-dealers and
insurance companies. The other classes have different fees, expenses and/or
minimum investment requirements than the Investor Class. The difference in the
fee structures between 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 advisor 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 for Advisor or Institutional Class shares. You also can
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 between the 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.
More information about the funds is contained in these documents
Annual and Semiannual Reports. These reports contain more information about the
funds' investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information. The SAI contains a more detailed, legal
description of the funds' operations, investment restrictions, policies and
practices. The SAI is incorporated by reference into this Prospectus. This means
that it is legally part of this Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).
In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
On the internet WWW.SEC.GOV.
By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying the
documents.)
Investment Company Act File No. 811-0816
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021 or 816-531-5575
9910
SH-PRS-xxxxx
<PAGE>
American Century
Prospectus
AC Fund
AC Large-Cap Fund
INSTITUTIONAL CLASS
NOVEMBER 8, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC.
Dear Investor,
Reading a prospectus doesn't have to be a chore. We've done the hard work so
you can focus on what's important--learning about the funds and tracking your
investments. Take a look inside, and you'll see this prospectus is different. It
takes a clear-cut approach to fund information.
Here's what you'll find:
o The funds' primary investments and risks
o A description of who may or may not want to invest in the funds
o An overview of services available and ways to manage your accounts
o Helpful tips and definitions of key investment terms
Whether you're a current investor or investing in mutual funds for the first
time, this prospectus will give you a clear understanding of the funds. If you
have questions, our Service Representatives are available weekdays 8 a.m. to 5
p.m. Central time. Our toll-free number is 1-800-345-3533. We look forward to
helping you achieve your financial goals.
Sincerely,
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
Table of Contents
An Overview of the Funds.......................................................2
Fund Performance History.......................................................3
Fees and Expenses..............................................................4
Information about the Funds
AC Fund
AC Large-Cap Fund..............................................................5
Management.....................................................................7
Investing with American Century...............................................XX
Share Price and Distributions.................................................XX
Taxes.........................................................................XX
CALLOUT
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in green italics, look for its definition
in the left margin.
This symbol highlights special information and helpful tips.
An Overview of the Funds
What are the funds' investment objectives?
These funds seek long-term capital growth.
What are the funds' primary investment strategies and principal risks?
The funds use a systematic, highly-automated approach to common stock investing.
This approach is designed to identify companies that are growing and whose share
price patterns suggest their stocks are likely to increase in value. A more
detailed description of the funds' investment style begins on page __.
The funds' principal risks include
o High Turnover - The funds'portfolio turnover may be very high. This could
result in relatively high commission costs and capital gains tax liabilities
for the funds and their shareholders, which may hurt the funds' performance.
o Market Risk - The value of a fund's shares will go up and down based on the
performance of the companies whose securities it owns and other factors
affecting the securities market generally.
o Price Volatility - The value of the funds' shares may fluctuate
significantly in the short term.
o Principal Loss - As with all mutual funds, if you sell your shares when
their value is less than the price you paid, you will lose money.
o Nondiversification - From time to time, the funds may pursue investment
opportunities that cause them to become temporarily nondiversified. In a
nondiversified fund, a price change in a single security may have a greater
impact on the fund's share price than would be the case in a diversified
fund.
Who may want to invest in the funds?
The funds may be a good investment if you are
o seeking long-term capital growth from your investment
o comfortable with the funds' short-term price volatility
o comfortable with the risks associated with the funds' investment strategy
o investing through an IRA or other tax-advantaged retirement plan
Who may not want to invest in the funds?
The funds may not be a good investment if you are
o seeking current income from your investment
o investing for a short period of time
o uncomfortable with short-term volatility in the value of your investment
CALLOUT
Portfolio turnover is a measure of how frequently a fund buys and sells
portfolio securities.
CALLOUT
A nondiversified fund may invest a greater percentage of its assets in a
particular portfolio security than may a diversified fund.
CALLOUT
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Fund Performance History
As new funds, the funds' performance history is not available as of the date of
this Prospectus.
CALLOUT
For current performance information, please call us at 1-800-345-3533 or visit
American Century's Web site at www.americancentury.com.
Fees and Expenses
There are no sales loads, fees or other charges
o to buy fund shares directly from American Century
o to reinvest dividends in additional shares
The following table describes the fees and expenses that you will pay if you buy
and hold shares of the funds.
Shareholder Transaction Expenses (fees paid directly from your investment)
Redemption/Exchange Fee(as a percentage
of amount redeemed/exchanged)
Shares held for less than five years (1) 2.0%
Shares held for five years or more None
1 The fee withheld from redemption/exchange proceeds is retained by the fund.
Annual Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses(1) Operating Expenses
--- -------------------- ----------- ------------------
<S> <C> <C> <C>
AC Fund 1.30% None 0.00% 1.30%
AC Large-Cap 1.15% None 0.00% 1.15%
</TABLE>
1 Other expenses, which include the fees and expenses of the funds'
independent directors, their legal counsel and interest, are expected to be
less than 0.005% for the current fiscal year.
Example
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you ...
o invest $10,000 in the fund
o redeem all of your shares at the end of the periods shown below
o earn a 5% return each year
o incur the same operating expenses as shown above
... your cost of investing in the fund would be:
1 year 3 years
AC Fund $339 $633
AC Large-Cap $324 $588
You would pay the following expenses if you did not redeem your shares:
1 year 3 years
AC Fund $132 $410
AC Large-Cap $117 $364
CALLOUT
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
Information about the Funds
AC Fund
AC Large-Cap Fund
What are the funds' investment objectives? These funds seek long-term capital
growth.
How do the funds pursue their investment objectives?
The funds use a systematic, highly-automated approach to common stock investing
developed by American Century. This approach relies heavily on quantitative
tools to identify attractive investment opportunities on a disciplined,
consistent basis. It utilizes a fundamental screening process to identify
attractive companies and a technical signal generator to determine optimum buy
and sell points based on a stock's historical price trends.
The quantitative tools used to identify attractive companies do so by screening
thousands of publicly traded securities to identify those that are growing. The
methodology identifies companies whose earnings and revenues are growing at a
successively faster, or accelerating, pace.
A second portion of the methodology attempts to identify companies whose share
price patterns suggest that they are likely to either rise or fall in price
(commonly referred to as technical analysis). This process is particularly
oriented to identifying attractive price patterns for companies demonstrating
the accelerating growth described above. These would be candidates for purchase.
Conversely, companies whose share price patterns suggest they are likely to
decline in price would be candidates for sale, if owned by the fund. On
occasion, the process may look favorably on share price patterns that appear
attractive even though the earnings of the underlying company are not growing at
an accelerating rate.
Although the funds are expected to invest primarily in U.S. companies, there is
no limit on the amount of assets the funds can invest in foreign companies.
Investments in foreign securities present some unique risks that are more fully
described in the funds' Statement of Additional Information.
The fund managers do not attempt to time the market. Instead, they intend to
keep the funds essentially fully invested in stocks regardless of the movement
of stock prices generally. However, in the fund managers' discretion, the funds
may invest up to 100% of their assets in U.S. government securities if the
funds' investment methodology fails to generate sufficient investment ideas or
to respond to adverse market, economic, political or other conditions. The funds
may not achieve their investment objectives while taking such a temporary
defensive position. When the managers believe that it is prudent, the funds also
may invest a portion of their assets in convertible securities, short-term
instruments, and non-leveraged futures and options. Futures and options can help
the funds' cash assets remain liquid while performing more like stocks. The
funds have a policy governing futures and options and similar derivative
securities to help manage the risk of these types of investments. A complete
description of the derivatives policy is included in the Statement of Additional
Information.
CALLOUT
Accelerating growth is shown, for example, by growth that is faster this quarter
than last or faster this year than the year before.
CALLOUT
Non-leveraged means that the fund may not invest in futures contracts where it
would be possible to lose more than the fund invested.
What kinds of securities do the funds buy?
The funds will usually purchase common stocks of U.S. and foreign companies, but
they can purchase other types of securities as well, such as domestic and
foreign preferred stocks, convertible securities, equity equivalent securities,
notes, bonds and other debt securities. The funds limit their purchase of debt
securities to investment-grade obligations.
What are the differences between the funds?
AC Large-Cap generally invests in larger companies. Companies considered to be
large generally have a market capitalization in excess of $5 billion. AC Fund,
by contrast, may invest in companies of any size.
What are the primary risks of investing in the funds?
The process driving the funds is specifically designed to respond quickly to
changing stock market conditions. As a result, the funds' portfolio turnover may
be significantly higher than that of many other funds. This heavy turnover,
perhaps as much as 200-300% per year or more, could result in relatively high
commission costs, substantial capital gain realizations for the funds, and
capital gains tax liabilities for the funds' shareholders.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
The fund managers may buy a large amount of a company's stock quickly, and often
will dispose of it quickly if the company's earnings or revenues decline. While
the managers believe this strategy provides substantial appreciation potential
over the long term, in the short term it can create a significant amount of
share price volatility. This volatility can be greater than that of the average
stock fund.
As with all funds, at any given time the value of your shares may be worth more
or less than the price you paid. If you sell your shares when the value is less
than the price you paid, you will lose money.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the funds' style, the funds' gains may not be as big as, or their losses may be
bigger than, other equity funds using different investment styles.
Although the fund managers intend to invest the funds' assets primarily in U.S.
stocks, the funds may invest in securities of foreign companies. To the extent a
fund invests in foreign securities, the overall risk of the fund could be
affected. Foreign securities can have certain unique risks, including
fluctuations in currency exchange rates, less stable political and economic
structures, reduced availability of public information, and lack of uniform
financial reporting and regulatory practices similar to those that apply in the
United States. These factors make investing in foreign securities generally
riskier than investing in U.S. stocks.
CALLOUT
Market capitalization is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share.
Management
Who manages the funds?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.
The Board of Directors
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor.
The Investment Advisor
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provides to the funds, the advisor receives a unified
management fee of 1.30% of the average net assets of the Institutional Class
shares of AC Fund and 1.15% of the average net assets of the Institutional Class
shares of AC Large-Cap. The amount of the management fee is calculated on a
class-by-class basis daily and paid monthly.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor pays all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent directors (including legal
counsel fees), and extraordinary expenses. A portion of the management fee may
be paid by the funds' advisor to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor.
The Fund Management Teams
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.
The portfolio managers on the investment teams are identified below:
James E. Stowers III
Mr. Stowers, Chief Executive Officer and Portfolio Manager, has been a member of
the team that manages the funds since their inception in November 1999. He also
is the Chief Investment Officer-U.S. Growth Equities and as such oversees the
investment discipline used by the funds and seven other growth funds. He joined
American Century in 1981. He has a bachelor's degree in finance from Arizona
State University.
John Small Jr.
Mr. Small, Portfolio Manager, has been a member of the team that manages the
funds since their inception in November 1999. He was promoted to Portfolio
Manager in February 1999. Since 1994 he has worked as an analyst and Portfolio
Manager for the Ultra fund. He joined American Century in May 1991. He has more
than 20 years experience with the U.S. Air Force. He has a bachelor's degree
from Rockford College and a master's degree in laser optics physics from the Air
Force Institute of Technology. He also has an MBA from Baker University.
CALLOUT
Code of Ethics
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or from profiting from the purchase and sale of the same security within 60
calendar days. In addition, the Code of Ethics requires portfolio managers and
other employees with access to information about the purchase or sale of
securities by the funds to obtain approval before executing permitted personal
trades.
Fundamental Investment Policies
Fundamental investment policies contained in the Statement of Additional
Information and the investment objective of the funds may not be changed without
a shareholder vote. The Board of Directors may change any other policies and
investment strategies.
Year 2000 Issues
Many of the world's computer systems were originally programmed in a way that
prevented them from properly recognizing or processing 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 funds' 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 funds' business,
particularly the provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds own could have Year 2000
computer problems. Foreign issuers, especially those in emerging markets, may be
more susceptible to such problems than U.S. issuers. These problems could
negatively affect the value of the issuers' securities, which, in turn, could
impact the funds' performance. The advisor 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 fund managers may consider
when making investment decisions, and other factors may receive greater weight.
Investing With American Century
Eligibility for Institutional Class Shares
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
retirement plans, endowments, foundations and financial advisors that meet the
funds' minimum investment requirements. Institutional Class shares are not
available for purchase by insurance companies for variable annuity and variable
life products.
Minimum Initial Investment Amounts
The minimum investment is $5 million ($3 million for endowments and foundations)
per fund. If you invest with us through a 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). In addition, financial intermediaries or plan
recordkeepers may require retirement plans to meet certain additional
requirements, such as plan size or a minimum level of assets per participant, in
order to be eligible to purchase Institutional Class shares.
Redemption of Shares in Low-Balance Accounts
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.
Services Automatically Available to You
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see "Conducting Business in
Writing" below.
Conducting Business in Writing
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.
<TABLE>
<CAPTION>
Ways to Manage Your Account
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
<S> <C> <C>
By telephone Open an account Make additional investments
Service Represetative If you are a current investor, you can open Call us if you have authorized us to invest
1-800-345-3533 an account by exchanging shares from another from your bank account.
American Century account.
Sell shares
Exchange shares Call a Service Representative.
Call us or use our Automated Information
Line if you have authorized us to accept
telephone instructions.
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
By mail or fax Open an account Make additional investments
P.O. Box 419385 Send a signed, completed application and Send us your check or money order for at
Kansas City, MO 64141-6385 check or money order payable to American least $50 with an investment slip or $250
Century Investments. without an investment slip. If you don't have
Fax an investment slip, include your name,
816-340-4655 Exchange shares address and account number on your check or
Send us written instructions to exchange money order.
your shares from one American Century
account to another. Sell shares
Send us written instructions or a redemption
form to sell shares. Call a Service
Representative to request a form.
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
By wire Open an account Make additional investments
Call us to set up your account or mail a Follow the wire instructions provided in the
completed application to the address "Open an account" section
provided in the "By Mail" section and give
your bank the following information. Sell shares
Our bank information: You can receive redemption proceeds by wire
* Please remember that if Commerce Bank N.A. or electronic transfer.
you request redemptions by Routing No. 101000019
wire, $10 will be deducted Account No. 2804918
from the amount redeemed. The fund name
Your bank also may charge a Your American Century account number*
fee. Your name Exchange shares
The contribution year (for IRAs only) Not available.
*For additional investments only
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
Automatically Open an account Make additional investments
Not available. Select "Establish Automatic Investments" on
your account application to make automatic
Exchange shares purchases of shares on a regular basis. You
Send us written instructions to set up an must invest at least $600 per year per
automatic exchange of your shares from one account.
American Century account to another.
Sell shares
If you have at least $10,000 in your account,
you may sell shares automatically by
establishing Check-A-Month or Automatic
Redemption plans.
</TABLE>
Abusive Trading Practices
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
Special Requirements for Large Redemptions
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities selected by the fund managers, in
the same manner as we do in computing the fund's net asset value. We may provide
these securities in lieu of cash 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.
Investing through Financial Intermediaries
If you own or are considering purchasing shares through a financial intermediary
or a retirement plan, your ability to purchase, exchange and redeem shares will
depend on the policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
those intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.
CALLOUT
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
Share Price and Distributions
Share Price
American Century determines the net asset value (NAV) of the funds as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is not open
(including certain U.S. holidays), we do not calculate the NAV. The NAV of a
fund share is the current value of the fund's assets, minus any liabilities,
divided by the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets may take place on weekends or holidays when a fund's NAV is not
calculated. So, the value of a fund's portfolio may be affected on days when you
can't purchase or redeem shares of the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
Distributions
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the funds will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as capital gains realized on
the sale of investment securities. Each fund generally pays distributions from
net income and capital gains, if any, once a year in December. They may make
more frequent distributions if necessary to comply with Internal Revenue Code
provisions.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distributions received
with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash.
CALLOUTS
The net asset value of a fund is the price of the fund's shares.
Capital gains are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.
Taxes
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
sales by you of fund shares may cause you to be taxed.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
<TABLE>
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or above
- ------------------------------------------ ---------------------------------------- -----------------------------------------
<S> <C> <C>
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them in cash. American Century will send you the tax
status of fund distributions for each calendar year in an annual tax mailing
(Form 1099-DIV) from the fund.
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
Taxes on Transactions
Your redemptions -- including exchanges to other American Century funds -- are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. 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
gains to you with respect to such shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes. If you have not certified to us that
your Social Security number or tax identification number is correct and that you
are not subject to 31% withholding, we are required to withhold and remit 31% of
dividends, capital gains distributions and redemptions to the IRS.
CALLOUT
Buying a Dividend
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
Multiple Class Information
American Century offers three classes of the funds: Investor Class,
Institutional Class and Advisor Class. The shares offered by this Prospectus are
Institutional Class shares and are offered primarily to institutional investors
through institutional distribution channels, such as employer-sponsored
retirement plans, or through banks, broker-dealers and insurance companies.
The Investor Class, which has no up-front or deferred charges, commissions or
12b-1 fees, is offered primarily to retail investors. The other classes have
different fees, expenses and/or minimum investment requirements than the
Institutional Class. The difference in the fee structures between 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 advisor
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
* 1-800-345-2021 for Investor Class shares
* 1-800-345-3533 for Advisor Class shares
You also can contact a sales representative or financial intermediary who offers
those classes of shares.
Except as described below, all classes of shares of the funds have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the 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.
More information about the funds is contained in these documents
Annual and Semiannual Reports. These reports contain more information about the
funds' investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information. The SAI contains a more detailed, legal
description of the funds' operations, investment restrictions, policies and
practices. The SAI is incorporated by reference into this Prospectus. This means
that it is legally part of this Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).
In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
On the internet WWW.SEC.GOV.
By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying the
documents.)
Investment Company Act File No. 811-0816
American Century Investments
P.O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
9910
SH-PRS-xxxxx
<PAGE>
American Century
Prospectus
AC Fund
AC Large-Cap Fund
ADVISOR CLASS
NOVEMBER 14, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
DISTRIBUTED BY
FUNDS DISTRIBUTOR, INC.
Dear Investor,
Reading a prospectus doesn't have to be a chore. We've done the hard work so
you can focus on what's important--learning about the funds and tracking your
investments. Take a look inside, and you'll see this prospectus is different. It
takes a clear-cut approach to fund information.
Here's what you'll find:
o The funds' primary investments and risks
o A description of who may or may not want to invest in the funds
o An overview of services available and ways to manage your accounts
o Helpful tips and definitions of key investment terms
Whether you're a current investor or investing in mutual funds for the first
time, this prospectus will give you a clear understanding of the funds. If you
have questions, our Service Representatives are available weekdays 8 a.m. to 5
p.m. Central time. Our toll-free number is 1-800-345-3533. We look forward to
helping you achieve your financial goals.
Sincerely,
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
Table of Contents
An Overview of the Funds....................................................2
Fund Performance History....................................................3
Fees and Expenses...........................................................4
Information about the Funds
AC Fund
AC Large-Cap Fund...........................................................5
Management..................................................................7
Investing with American Century............................................XX
Share Price and Distributions..............................................XX
Taxes......................................................................XX
Multiple Class Information.................................................XX
CALLOUT
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in green italics, look for its definition
in the left margin.
This symbol highlights special information and helpful tips.
An Overview of the Funds
What are the funds' investment objectives?
These funds seek long-term capital growth.
What are the funds' primary investment strategies and principal risks?
The funds use a systematic, highly-automated approach to common stock investing.
This approach is designed to identify companies that are growing and whose share
price patterns suggest their stocks are likely to increase in value. A more
detailed description of the funds' investment style begins on page __.
The funds' principal risks include
o High Turnover - The funds'portfolio turnover may be very high. This could
result in relatively high commission costs and capital gains tax liabilities
for the funds and their shareholders, which may hurt the funds' performance.
o Market Risk - The value of a fund's shares will go up and down based on the
performance of the companies whose securities it owns and other factors
affecting the securities market generally.
o Price Volatility - The value of the funds' shares may fluctuate
significantly in the short term.
o Principal Loss - As with all mutual funds, if you sell your shares when
their value is less than the price you paid, you will lose money.
o Nondiversification - From time to time, the funds may pursue investment
opportunities that cause them to become temporarily nondiversified. In a
nondiversified fund, a price change in a single security may have a greater
impact on the fund's share price than would be the case in a diversified
fund.
Who may want to invest in the funds?
The funds may be a good investment if you are
o seeking long-term capital growth from your investment
o comfortable with the funds' short-term price volatility
o comfortable with the risks associated with the funds' investment strategy
o investing through an IRA or other tax-advantaged retirement plan
Who may not want to invest in the funds?
The funds may not be a good investment if you are
o seeking current income from your investment
o investing for a short period of time
o uncomfortable with short-term volatility in the value of your investment
CALLOUT
Portfolio turnover is a measure of how frequently a fund buys and sells
portfolio securities.
CALLOUT
A nondiversified fund may invest a greater percentage of its assets in a
particular portfolio security than may a diversified fund.
CALLOUT
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Fund Performance History
As new funds, the funds' performance history is not available as of the date of
this Prospectus.
CALLOUT
For current performance information, please call us at 1-800-345-3533 or visit
American Century's Web site at www.americancentury.com.
Fees and Expenses
There are no sales loads, fees or other charges
o to buy fund shares directly from American Century
o to reinvest dividends in additional shares
The following table describes the fees and expenses that you will pay if you buy
and hold shares of the funds.
Shareholder Transaction Expenses (fees paid directly from your investment)
Redemption/Exchange Fee(as a percentage
of amount redeemed/exchanged)
Shares held for less than five years (1) 2.0%
Shares held for five years or more None
1 The fee withheld from redemption/exchange proceeds is retained by the fund.
Annual Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
Management Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses(1) Operating Expenses
<S> <C> <C> <C> <C>
AC Fund 1.25% 0.50% 0.00% 1.75%
AC Large-Cap 1.10% 0.50% 0.00% 1.60%
</TABLE>
1 Other expenses, which include the fees and expenses of the funds'
independent directors, their legal counsel and interest, are expected to be
less than 0.005% for the current fiscal year.
Example
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you ...
o invest $10,000 in the fund
o redeem all of your shares at the end of the periods shown below
o earn a 5% return each year
o incur the same operating expenses as shown above
... your cost of investing in the fund would be:
1 year 3 years
AC Fund $383 $767
AC Large-Cap $369 $723
You would pay the following expenses if you did not redeem your shares:
1 year 3 years
AC Fund $177 $548
AC Large-Cap $162 $502
CALLOUT
Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
Information about the Funds
AC Fund
AC Large-Cap Fund
What are the funds' investment objectives?
These funds seek long-term capital growth.
How do the funds pursue their investment objectives?
The funds use a systematic, highly-automated approach to common stock investing
developed by American Century. This approach relies heavily on quantitative
tools to identify attractive investment opportunities on a disciplined,
consistent basis. It utilizes a fundamental screening process to identify
attractive companies and a technical signal generator to determine optimum buy
and sell points based on a stock's historical price trends.
The quantitative tools used to identify attractive companies do so by screening
thousands of publicly traded securities to identify those that are growing. The
methodology identifies companies whose earnings and revenues are growing at a
successively faster, or accelerating, pace.
A second portion of the methodology attempts to identify companies whose share
price patterns suggest that they are likely to either rise or fall in price
(commonly referred to as technical analysis). This process is particularly
oriented to identifying attractive price patterns for companies demonstrating
the accelerating growth described above. These would be candidates for purchase.
Conversely, companies whose share price patterns suggest they are likely to
decline in price would be candidates for sale, if owned by the fund. On
occasion, the process may look favorably on share price patterns that appear
attractive even though the earnings of the underlying company are not growing at
an accelerating rate.
Although the funds are expected to invest primarily in U.S. companies, there is
no limit on the amount of assets the funds can invest in foreign companies.
Investments in foreign securities present some unique risks that are more fully
described in the funds' Statement of Additional Information.
The fund managers do not attempt to time the market. Instead, they intend to
keep the funds essentially fully invested in stocks regardless of the movement
of stock prices generally. However, in the fund managers' discretion, the funds
may invest up to 100% of their assets in U.S. government securities if the
funds' investment methodology fails to generate sufficient investment ideas or
to respond to adverse market, economic, political or other conditions. The funds
may not achieve their investment objectives while taking such a temporary
defensive position. When the managers believe that it is prudent, the funds also
may invest a portion of their assets in convertible securities, short-term
instruments, and non-leveraged futures and options. Futures and options can help
the funds' cash assets remain liquid while performing more like stocks. The
funds have a policy governing futures and options and similar derivative
securities to help manage the risk of these types of investments. A complete
description of the derivatives policy is included in the Statement of Additional
Information.
CALLOUT
Accelerating growth is shown, for example, by growth that is faster this quarter
than last or faster this year than the year before.
CALLOUT
Non-leveraged means that the fund may not invest in futures contracts where it
would be possible to lose more than the fund invested.
What kinds of securities do the funds buy?
The funds will usually purchase common stocks of U.S. and foreign companies, but
they can purchase other types of securities as well, such as domestic and
foreign preferred stocks, convertible securities, equity equivalent securities,
notes, bonds and other debt securities. The funds limit their purchase of debt
securities to investment-grade obligations.
What are the differences between the funds?
AC Large-Cap generally invests in larger companies. Companies considered to be
large generally have a market capitalization in excess of $5 billion. AC Fund,
by contrast, may invest in companies of any size.
What are the primary risks of investing in the funds?
The process driving the funds is specifically designed to respond quickly to
changing stock market conditions. As a result, the funds' portfolio turnover may
be significantly higher than that of many other funds. This heavy turnover,
perhaps as much as 200-300% per year or more, could result in relatively high
commission costs, substantial capital gain realizations for the funds, and
capital gains tax liabilities for the funds' shareholders.
The value of a fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities a fund owns will go
up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
The fund managers may buy a large amount of a company's stock quickly, and often
will dispose of it quickly if the company's earnings or revenues decline. While
the managers believe this strategy provides substantial appreciation potential
over the long term, in the short term it can create a significant amount of
share price volatility. This volatility can be greater than that of the average
stock fund.
As with all funds, at any given time the value of your shares may be worth more
or less than the price you paid. If you sell your shares when the value is less
than the price you paid, you will lose money.
Market performance tends to be cyclical, and in the various cycles, certain
investment styles may fall in and out of favor. If the market is not favoring
the funds' style, the funds' gains may not be as big as, or their losses may be
bigger than, other equity funds using different investment styles.
Although the fund managers intend to invest the funds' assets primarily in U.S.
stocks, the funds may invest in securities of foreign companies. To the extent a
fund invests in foreign securities, the overall risk of the fund could be
affected. Foreign securities can have certain unique risks, including
fluctuations in currency exchange rates, less stable political and economic
structures, reduced availability of public information, and lack of uniform
financial reporting and regulatory practices similar to those that apply in the
United States. These factors make investing in foreign securities generally
riskier than investing in U.S. stocks.
CALLOUT
Market capitalization is the value of a company as determined by multiplying the
number of shares of its stock outstanding by its current market price per share.
Management
Who manages the funds?
The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.
The Board of Directors
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor.
The Investment Advisor
The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provides to the funds, the advisor receives a unified
management fee of 1.25% of the average net assets of the Advisor Class shares of
AC Fund and 1.10% of the average net assets of the Advisor Class shares of AC
Large-Cap. The amount of the management fee is calculated on a class-by-class
basis daily and paid monthly.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor pays all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent directors (including legal
counsel fees), and extraordinary expenses. A portion of the management fee may
be paid by the funds' advisor to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor.
The Fund Management Teams
The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.
The portfolio managers on the investment teams are identified below:
James E. Stowers III
Mr. Stowers, Chief Executive Officer and Portfolio Manager, has been a member of
the team that manages the funds since their inception in November 1999. He also
is the Chief Investment Officer-U.S. Growth Equities and as such oversees the
investment discipline used by the funds and seven other growth funds. He joined
American Century in 1981. He has a bachelor's degree in finance from Arizona
State University.
John Small Jr.
Mr. Small, Portfolio Manager, has been a member of the team that manages the
funds since their inception in November 1999. He was promoted to Portfolio
Manager in February 1999. Since 1994 he has worked as an analyst and Portfolio
Manager for the Ultra fund. He joined American Century in May 1991. He has more
than 20 years experience with the U.S. Air Force. He has a bachelor's degree
from Rockford College and a master's degree in laser optics physics from the Air
Force Institute of Technology. He also has an MBA from Baker University.
CALLOUT
Code of Ethics
American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or from profiting from the purchase and sale of the same security within 60
calendar days. In addition, the Code of Ethics requires portfolio managers and
other employees with access to information about the purchase or sale of
securities by the funds to obtain approval before executing permitted personal
trades.
Fundamental Investment Policies
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Directors may change any other policies
and investment strategies.
Year 2000 Issues
Many of the world's computer systems were originally programmed in a way that
prevented them from properly recognizing or processing 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 funds' 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 funds' business,
particularly the provision of shareholder services, may be hampered.
In addition, the issuers of securities the funds own could have Year 2000
computer problems. Foreign issuers, especially those in emerging markets, may be
more susceptible to such problems than U.S. issuers. These problems could
negatively affect the value of the issuers' securities, which, in turn, could
impact the funds' performance. The advisor 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 fund managers may consider
when making investment decisions, and other factors may receive greater weight.
Investing With American Century
Eligibility for Advisor Class Shares
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.
Investing through Financial Intermediaries
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
Please contact your financial intermediary or plan sponsor for a complete
description of its policies.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.
Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.
American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
those intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.
CALLOUT
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
Abusive Trading Practices
We do not permit market timing or other abusive trading practices in our funds.
Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.
Special Requirements for Large Redemptions
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities selected by the fund managers, in
the same manner as we do in computing the fund's net asset value. We may provide
these securities in lieu of cash 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.
Share Price and Distributions
Share Price
American Century determines the net asset value (NAV) of the funds as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is not open
(including certain U.S. holidays), we do not calculate the NAV. The NAV of a
fund share is the current value of the fund's assets, minus any liabilities,
divided by the number of fund shares outstanding.
If current market prices of securities owned by a fund are not readily
available, the advisor may determine their fair value in accordance with
procedures adopted by the fund's Board. Trading of securities in foreign markets
may not take place every day the Exchange is open. Also, trading in some foreign
markets may take place on weekends or holidays when a fund's NAV is not
calculated. So, the value of a fund's portfolio may be affected on days when you
can't purchase or redeem shares of the fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
Distributions
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the funds will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as capital gains realized on
the sale of investment securities. Each fund generally pays distributions from
net income and capital gains, if any, once a year in December. They may make
more frequent distributions if necessary to comply with Internal Revenue Code
provisions.
You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distributions received
with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash.
CALLOUTS
The net asset value of a fund is the price of the fund's shares.
Capital gains are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.
Taxes
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.
Taxable Accounts
If you own fund shares through a taxable account, distributions by the fund and
sales by you of fund shares may cause you to be taxed.
Taxability of Distributions
Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:
<TABLE>
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or above
- ------------------------------------------ ---------------------------------------- -----------------------------------------
<S> <C> <C>
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>
The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distributions in
additional shares or take them in cash. American Century will send you the tax
status of fund distributions for each calendar year in an annual tax mailing
(Form 1099-DIV) from the fund.
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
Taxes on Transactions
Your redemptions -- including exchanges to other American Century funds -- are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. 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
gains to you with respect to such shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes. If you have not certified to us that
your Social Security number or tax identification number is correct and that you
are not subject to 31% withholding, we are required to withhold and remit 31% of
dividends, capital gains distributions and redemptions to the IRS.
CALLOUT
Buying a Dividend
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
Multiple Class Information
American Century offers three classes of the funds: Investor Class,
Institutional Class and Advisor Class. The shares offered by this Prospectus are
Advisor Class shares and are offered primarily to institutional investors
through institutional distribution channels, such as employer-sponsored
retirement plans, or through banks, broker-dealers and insurance companies.
The Investor Class, which has no up-front or deferred charges, commissions or
12b-1 fees, is offered primarily to retail investors. The other classes have
different fees, expenses and/or minimum investment requirements than the Advisor
Class. The difference in the fee structures between 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 advisor 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
1-800-345-2021 for Investor Class shares
1-800-345-3533 for Institutional Class shares.
You also can contact a sales representative or financial intermediary who offers
those classes of shares.
Except as described below, all classes of shares of the funds have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the 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.
Service and Distribution Fees
Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay out of fund assets certain expenses associated with the distribution of
their shares. The funds' Advisor Class shares have a 12b-1 Plan. Under the Plan,
the fund pays an annual fee of 0.50% of fund assets, half for certain
shareholder and administrative services and half for distribution services. The
advisor, as paying agent for the funds, pays all or a portion of such fees to
the banks, broker-dealers and insurance companies that make such shares
available. Because these fees are paid out of the fund's assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. For additional
information about the Plan and its terms, see "Multiple Class Structure - Master
Distribution and Shareholder Services Plan" in the Statement of Additional
Information.
More information about the funds is contained in these documents
Annual and Semiannual Reports. These reports contain more information about the
funds' investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information. The SAI contains a more detailed, legal
description of the funds' operations, investment restrictions, policies and
practices. The SAI is incorporated by reference into this Prospectus. This means
that it is legally part of this Prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).
In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
On the internet WWW.SEC.GOV.
By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying the
documents.)
Investment Company Act File No. 811-0816
American Century Investments
P.O. Box 419385
Kansas City, Missouri 64141-6385
1-800-345-3533 or 816-531-5575
9910
SH-PRS-xxxxx
<PAGE>
American Century Mutual Funds, Inc.
Statement of Additional Information
AC Fund
AC Large-Cap Fund
NOVEMBER 14, 1999
This Statement of Additional Information adds to the discussion in the funds'
Prospectus, dated November 14, 1999, but is not a prospectus. The Statement of
Additional Information should be read in conjunction with the funds' current
Prospectus. If you would like a copy of a Prospectus, please contact us at the
address or telephone numbers listed on the back cover or visit American
Century's Web site at www.americancentury.com.
This Statement of Additional Information incorporates by reference certain
information that appears in the funds' annual and semiannual reports, which are
delivered to all shareholders. You may obtain a free copy of the funds' annual
or semiannual reports by calling 1-800-345-2021.
Distributed by
Funds Distributor, Inc.
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 14, 1999
TABLE OF CONTENTS
The Funds' History ........................................................ 2
Fund Investment Guidelines ................................................ 2
Detailed Information About the Funds ...................................... 7
Investment Strategies and Risks ................................. 7
Investment Policies ............................................. 17
Portfolio Turnover .............................................. 18
Management ................................................................ 19
The Board of Directors .......................................... 19
Officers ........................................................ 21
Service Providers ......................................................... 24
Investment Advisor .............................................. 24
Transfer Agent and Administrator ................................ 25
Distributor ..................................................... 25
Other Service Providers ................................................... 25
Custodian Banks
Independent Auditor
Brokerage Allocation ...................................................... 27
Information about Fund Shares ............................................. 28
Multiple Class Structure ........................................ 28
Buying and Selling Fund Shares .................................. 30
Valuation of a Fund's Securities ................................ 30
Taxes ..................................................................... 31
Federal Income Tax
State Income Tax
How Fund Performance Information Is Calculated ............................ 32
Performance Comparisons
Permissible Advertising Information
Multiple Class Performance Advertising
THE FUNDS' HISTORY
American Century Mutual Funds, Inc. is a registered open-end management
investment company that was organized in 1957 as a Delaware corporation under
the name Twentieth Century Investors, Inc. On July 2, 1990, the company
reorganized as a Maryland corporation, and in January 1997 it changed its name
to American Century Mutual Funds, Inc. Throughout this Statement of Additional
Information we refer to American Century Mutual Funds, Inc. as the corporation.
Each fund described in this Statement of Additional Information is a separate
series of the corporation and operates for many purposes as if it were an
independent company. Each fund has its own investment objective, strategy,
management team, assets, tax identification and stock registration numbers.
<TABLE>
Investor Class Advisor Class Institutional Class
Ticker Inception Ticker Inception Ticker Inception
Fund Symbol Date Symbol Date Symbol Date
- ---- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
AC Fund N/A 11/30/1999 N/A N/A N/A N/A
AC Large-Cap N/A 11/30/1999 N/A N/A N/A N/A
</TABLE>
FUND INVESTMENT GUIDELINES
This section explains the extent to which the funds' advisor, American
Century Investment Management, Inc., can use various investment vehicles and
strategies in managing a fund's assets. Descriptions of the investment
techniques and risks associated with each appear in the section, "Investment
Strategies and Risks," which begins on page __. In the case of the funds'
principal investment strategies, these descriptions elaborate upon discussions
contained in the Prospectus.
Each fund is an open-end, management investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act). Each fund will
normally be diversified. Diversified means that, with respect to 75% of its
total assets, each fund will not invest more than 5% of its total assets in the
securities of a single issuer. However, from time to time the funds may pursue
investment opportunities that cause them to become temporarily nondiversified.
To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer (other than the U.S. government or
a regulated investment company), and (2) with respect to at least 50% of its
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer.
In general, within the restrictions outlined here and in the funds'
Prospectus, the fund managers have broad powers to decide how to invest fund
assets, including the power to hold them uninvested.
Investments are varied according to what is judged advantageous under
changing economic conditions. It is the advisor's 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 advisor's intention that each fund
generally will consist of domestic and foreign common stocks, and equity
equivalent securities. However, subject to the specific limitations applicable
to a fund, the funds' management teams may invest the assets of each fund in
varying amounts using other instruments and techniques, such as those described
in the next section, when such a course is deemed appropriate in order to
attempt to attain a fund's investment objective. Senior securities that, in the
opinion of the managers, are high-grade issues also may be purchased for
defensive purposes.
So long as a sufficient number of acceptable securities are available, the
managers intend to keep the funds fully invested in stocks identified as
attractive by the funds' investment methodology, regardless of the movement of
stock prices, generally. However, should the funds' investment methodology fail
to identify sufficient investment candidates, or for any other reason including
the desire to take a temporary defensive position, the funds may invest up to
100% of their assets in U.S. government securities. In most circumstances, the
funds' actual level of cash and cash equivalents will be less than 10%. The
managers may use S&P 500 Index futures as a way to expose the funds' cash assets
to the market, while maintaining liquidity. As mentioned in the Prospectus, the
managers may not leverage the funds' portfolios, so there is no greater market
risk to the funds than if they purchase stocks. See "Derivative Securities,"
page __, "Short-Term Securities," page __ and "Futures and Options," page __ .
DETAILED INFORMATION ABOUT THE FUNDS
INVESTMENT STRATEGIES AND RISKS
This section describes various investment vehicles and techniques that the
fund managers can use in managing a fund's assets. It also details the risks
associated with each, because each technique contributes to a fund's overall
risk profile.
Foreign Securities
Each fund may invest an unlimited portion of its total 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.
Investments in foreign securities may present certain risks, including:
Currency Risk. The value of the foreign investments held by the funds may be
significantly affected by changes in currency exchange rates. The dollar value
of a foreign security generally decreases when the value of the dollar rises
against the foreign currency in which the security is denominated and tends to
increase when the value of the dollar falls against such currency. In addition,
the value of fund assets may be affected by losses and other expenses incurred
in converting between various currencies in order to purchase and sell foreign
securities and by currency restrictions, exchange control regulation, currency
devaluations and political developments.
Political and Economic Risk. The economies of many of the countries in which
the funds invest are not as developed as the economy of the United States and
may be subject to significantly different forces. Political or social
instability, expropriation, nationalization, or confiscatory taxation, and
limitations on the removal of funds or other assets, also could adversely affect
the value of investments. Further, the funds may encounter difficulties or be
unable to enforce ownership rights, pursue legal remedies or obtain judgments in
foreign courts.
Regulatory Risk. Foreign companies generally are not subject to the
regulatory controls imposed on U.S. issuers and, in general, there is less
publicly available information about foreign securities than is available about
domestic securities. Many foreign companies are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the funds may be reduced by a withholding tax at the
sources, which would reduce dividend income payable to shareholders.
Market and Trading Risk. Brokerage commission rates in foreign countries,
which generally are fixed rather than subject to negotiation as in the United
States, are likely to be higher. The securities markets in many of the countries
in which the funds invest will have substantially less trading volume than the
principal U.S. markets. As a result, the securities of some companies in these
countries may be less liquid and more volatile than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There
generally is less government regulation and supervision of foreign stock
exchanges, brokers and issuers, which may make it difficult to enforce
contractual obligations.
Clearance and Settlement Risk. Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the funds are uninvested and no return is earned thereon. The inability of
the funds to make intended security purchases due to clearance and settlement
problems could cause the funds to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to clearance and settlement
problems could result either in losses to the funds due to subsequent declines
in the value of the portfolio security or, if the fund has entered into a
contract to sell the security, liability to the purchaser.
Ownership Risk. Evidence of securities ownership may be uncertain in many
foreign countries. In many of these countries, the most notable of which is the
Russian Federation, the ultimate evidence of securities ownership is the share
register held by the issuing company or its registrar. While some companies may
issue share certificates or provide extracts of the company's share register,
these are not negotiable instruments and are not effective evidence of
securities ownership. In an ownership dispute, the company's share register is
controlling. As a result, there is a risk that a fund's trade details could be
incorrectly or fraudulently entered on the issuer's share register at the time
of the transaction, or that a fund's ownership position could thereafter be
altered or deleted entirely, resulting in a loss to the fund. While the funds
intend to limit their direct investments in Russian companies, if any, to those
that utilize an independent registrar, there can be no assurance that such
investments will not result in a loss to the funds.
Convertible Debt Securities
A convertible debt security is a fixed-income security that offers the
potential for capital appreciation through a conversion feature that enables the
holder to convert the fixed-income security into a stated number of shares of
common stock. As fixed-income securities, convertible debt securities provide a
stable stream of income, with generally higher yields than common stocks.
Because convertible debt securities offer the potential to benefit from
increases in the market price of the underlying common stock, however, they
generally offer lower yields than non-convertible securities of similar quality.
Of course, like all fixed- income securities, there can be no assurance of
current income because the issuers of the convertible debt securities may
default on their obligations. In addition, there can be no assurance of capital
appreciation because the value of the underlying common stock will fluctuate.
Convertible debt securities generally are subordinated to other similar but
non-convertible debt securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Unlike a convertible security that is a single security, a synthetic
convertible security is comprised of two distinct securities that together
resemble convertible securities in certain respects. Synthetic convertible
securities are created by combining non-convertible bonds or preferred stocks
with warrants or stock call options. The options that will form elements of
synthetic convertible securities will be listed on a securities exchange or
NASDAQ. The two components of a synthetic convertible security, which will be
issued with respect to the same entity, generally are not offered as a unit, and
may be purchased and sold by the fund at different times. Synthetic convertible
securities differ from convertible securities in certain respects, including
that each component of a synthetic convertible security has a separate market
value and responds differently to market fluctuations. Investing in synthetic
convertible securities involves the risk normally found in holding the
securities comprising the synthetic convertible security.
Short Sales
A fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire securities equivalent in kind and amount to the
securities being sold short.
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. 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 Lending
In order to realize additional income, a fund may lend its portfolio
securities. Such loans may not exceed one-third of the fund's total assets
valued at market except (i) through the purchase of debt securities in
accordance with its investment objectives, policies and limitations, or (ii) by
engaging in repurchase agreements with respect to portfolio securities.
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 described more accurately 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 is 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 fund managers
anticipate;
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 advisor'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 advisor will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the advisor's policy for investments in the derivative
securities annually.
Investment in Companies with Limited Operating Histories
The funds may invest up to 10% of their assets in the securities of issuers
with limited operating histories. The fund managers consider an issuer to have a
limited operating history if that issuer has a record of less than three years
of continuous operation. The managers will consider periods of capital
formation, incubation, consolidations, and research and development in
determining whether a particular issuer has a record of three years of
continuous operation.
Investments in securities of issuers with limited operating histories may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating histories and financial
information upon which the managers may base their investment decision on behalf
of the funds. In addition, financial and other information regarding such
issuers, when available, may be incomplete or inaccurate.
Other Investment Companies
Each of the funds may invest up to 10% of its total assets in other mutual
funds, including those advised by the advisor, provided that the investment is
consistent with the fund's investment policies and restrictions. Under the
Investment Company Act, a fund's investment in such securities, subject to
certain exceptions, currently is limited to (a) 3% of the total voting stock of
any one investment company; (b) 5% of the fund's total assets with respect to
any one investment company; and (c) 10% of a fund's total assets in the
aggregate. Such purchases will be made in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than the customary
brokers' commissions. As a shareholder of another investment company, a fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the management fee that each fund bears directly in connection
with its own operations.
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 purchase 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.
Because 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 and 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.
No fund will invest more than 15% of its assets in repurchase agreements
maturing in more than seven days.
When-Issued and Forward Commitment Agreements
The funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, a
fund assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. 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. While the fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.
In purchasing securities on a when-issued or forward commitment basis, a fund
will establish and maintain until the settlement date a segregated account
consisting of cash, cash equivalents or other appropriate liquid securities in
an amount sufficient to meet the purchase price. When the time comes to pay for
the when-issued securities, a fund will meet its obligations with available
cash, through the sale of securities, or, although it would not normally expect
to do so, by selling the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). Selling
securities to meet when-issued or forward commitment obligations may generate
taxable capital gains or losses.
Restricted and Illiquid Securities
The funds may, from time to time, purchase restricted or illiquid securities,
including 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 (SEC) 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. Accordingly, the Board
of Directors is responsible for developing and establishing the guidelines and
procedures for determining the liquidity of Rule 144A securities. As allowed by
Rule 144A, the Board of Directors of the funds has delegated the day-to-day
function of determining the liquidity of Rule 144A securities to the fund
managers. The Board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Because 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 or other
security that is illiquid. In such an event, the fund managers will consider
appropriate remedies to minimize the effect on such fund's liquidity.
Short-Term Securities
In order to meet anticipated redemptions, to hold pending the purchase of
additional securities for a fund's portfolio, or, in some cases, for temporary
defensive purposes, the funds may invest a portion of their assets in money
market and other short-term securities.
Examples of those securities include
o Securities issued or guaranteed by the U.S. government and its agencies and
instrumentalities
o Commercial Paper
o Certificates of Deposit and Euro Dollar Certificates of Deposit
o Bankers' Acceptances
o Short-term notes, bonds, debentures or other debt instruments
o Repurchase agreements
In addition, each fund may invest up to 5% of its total assets in any money
market fund, including those advised by the advisor.
Futures and Options
Each fund may enter into futures contracts, options or options on futures
contracts. The funds may not, however, enter into a futures transaction for
speculative purposes. Generally, futures transactions will be used to:
o protect against a decline in market value of the fund's securities (taking
a short futures position), or
o protect against the risk of an increase in market value for securities in
which the fund generally invests at a time when the fund is not fully
invested (taking a long futures position), or
o provide a temporary substitute for the purchase of an individual security
that may not be purchased in an orderly fashion.
Some futures and options strategies, such as selling futures, buying puts and
writing calls, hedge a fund's investments against price fluctuations. Other
strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure.
Although other techniques may be used to control a fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.
For example, the sale of a future by a fund means the fund becomes obligated
to deliver the security (or securities, in the case of an index future) at a
specified price on a specified date. The purchase of a future means the fund
becomes obligated to buy the security (or securities) at a specified price on a
specified date. Futures contracts provide for the sale by one party and purchase
by another party of a specific security at a specified future time and price.
The fund managers may engage in futures and options transactions based on
securities indices that are consistent with the fund's investment objectives.
Examples of indices that may be used include the Bond Buyer Index of Municipal
Bonds for fixed-income funds, or the S&P 500 Index for equity funds. The
managers also may engage in futures and options transactions based on specific
securities, such as U.S. Treasury bonds or notes. Futures contracts are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission (CFTC), a
U.S. government agency.
Index futures contracts differ from traditional futures contracts in that
when delivery takes place, no stocks or bonds change hands. Instead, these
contracts settle in cash at the spot market value of the index. Although other
types of futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date. A futures position may be closed by taking an opposite
position in an identical contract (i.e., buying a contract that has previously
been sold or selling a contract that has previously been bought).
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. The
margin deposit is intended to ensure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute a margin
transaction for purposes of the fund's investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums. Cash held in the margin account generally 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 marking the contract to market. Changes in variation margin are
recorded by the fund as unrealized gains or losses. At any time prior to
expiration 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
gain.
Risks Related to Futures and Options Transactions
Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the fund managers apply a hedge at an inappropriate
time or judge interest rate or equity market trends incorrectly, futures and
options strategies may lower a fund's return.
A fund could suffer losses if it is unable to close out its position because
of an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the fund managers consider it appropriate or desirable to
do so. In the event of adverse price movements, a fund would be required to
continue making daily cash payments to maintain its required margin. If the fund
had insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the fund managers would not otherwise elect
to do so. In addition, a fund may be required to deliver or take delivery of
instruments underlying futures contracts it holds. The fund managers will seek
to minimize these risks by limiting the contracts entered into on behalf of the
funds to those traded on national futures exchanges and for which there appears
to be a liquid secondary market.
A fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if securities underlying
futures contracts purchased by a fund had different maturities than those of the
portfolio securities being hedged. Such imperfect correlation may give rise to
circumstances in which a fund loses money on a futures contract at the same time
that it experiences a decline in the value of its hedged portfolio securities. A
fund also could lose margin payments it has deposited with a margin broker, if,
for example, the broker became bankrupt.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
Options on Futures
By purchasing an option on a futures contract, a fund obtains the right, but
not the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. A fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin payments unless the option is exercised.
Although they do not currently intend to do so, the funds may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the funds would give up some
ability to participate in a price increase on the underlying security. If a fund
were to engage in options transactions, it would own the futures contract at the
time a call were written and would keep the contract open until the obligation
to deliver it pursuant to the call expired.
Restrictions on the Use of Futures Contracts and Options
Each fund may enter into futures contracts, options or options on futures
contracts.
Under the Commodity Exchange Act, a fund may enter into futures and options
transactions (a) for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums or (b) for purposes other than
hedging, provided that assets committed to initial margin and option premiums do
not exceed 5% of the fund's total assets. To the extent required by law, each
fund will segregate cash or securities on its records in an amount sufficient to
cover its obligations under the futures contracts and options.
Forward Currency Exchange Contracts
Each fund may purchase and sell foreign currency on a spot (i.e., cash) basis
and may engage in forward currency contacts, currency options and futures
transactions for hedging or any other lawful purpose. See "Derivative
Securities," page __.
The funds expect to use forward contracts under two circumstances:
(1) When the fund managers wish 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; or
(2) When the fund managers believe 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 portfolio securities either denominated in, or whose value is tied
to, such foreign currency.
In 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 and the subject
foreign currency.
Under the second circumstance, when the fund managers believe 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 segregate on its records cash or
securities in an amount sufficient to cover its obligations under the contract.
The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible because 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 fund managers do 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 fund
managers believe that it is important to have flexibility to enter into such
forward contracts when they determine that a fund's best interests may be
served.
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 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.
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations
on borrowing, the following restrictions apply at the time transactions are
entered into. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in a fund's net assets will not be considered
in determining whether it has complied with its investment restrictions.
Fundamental Investment Policies
The funds' fundamental investment restrictions are set forth below. These
investment restrictions may not be changed without approval of a majority of the
outstanding votes of shareholders of a fund, as determined in accordance with
the Investment Company Act.
For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents, (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry, and (d) personal credit and business credit businesses will
be considered separate industries.
Subject Policy
- --------------------------------------------------------------------------------
Senior Securities A fund may not issue senior securities, except as
permitted under the Investment Company Act.
- --------------------------------------------------------------------------------
Borrowing A fund may not borrow money, except for temporary or
emergency purposes (not for leveraging or investment)
in an amount not exceeding 33-1/3% of the fund's
total assets (including the amount borrowed) less
liabilities (other than borrowings).
- --------------------------------------------------------------------------------
Lending A fund may not lend any security or make any other
loan if, as a result, more than 33-1/3% of the fund's
total assets would be lent to other parties, except,
(i) through the purchase of debt securities in
accordance with its investment objective, policies
and limitations or (ii) by engaging in repurchase
agreements with respect to portfolio securities.
- --------------------------------------------------------------------------------
Real Estate A fund may not purchase or sell real estate
unless acquired as a result of ownership of
securities or other instruments. This policy shall
not prevent a fund from investing in securities or
other instruments backed by real estate or securities
of companies that deal in real estate or are engaged
in the real estate business.
- --------------------------------------------------------------------------------
Concentration A fund may not concentrate its investments in
securities of issuers in a particular industry (other
than securities issued or guaranteed by the U.S.
government or any of its agencies or
instrumentalities).
- --------------------------------------------------------------------------------
Underwriting A fund may not act as an underwriter of securities
issued by others, except to the extent that the fund
may be considered an underwriter within the meaning
of the Securities Act of 1933 in the disposition of
restricted securities.
- --------------------------------------------------------------------------------
Commodities A fund may not purchase or sell physical commodities
unless acquired as a result of ownership of
securities or other instruments; provided that this
limitation shall not prohibit the fund from
purchasing or selling options and futures contracts
or from investing in securities or other instruments
backed by physical commodities.
- --------------------------------------------------------------------------------
Control A fund may not invest for purposes of exercising
control over management.
- --------------------------------------------------------------------------------
Nonfundamental Investment Policies
In addition, the funds are subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Directors.
- --------------------------------------------------------------------------------
Subject Policy
- --------------------------------------------------------------------------------
Borrowing A fund may not purchase additional investment securities at
any time during which outstanding borrowings exceed 5% of
the total assets of the fund.
- --------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter into a
repurchase agreement if, as a result, more than 15% of its
net assets would be invested in repurchase agreements not
entitling the holder to payment of principal and interest
within seven days and in securities that are illiquid by
virtue of legal or contractual restrictions on resale or the
absence of a readily available market.
- --------------------------------------------------------------------------------
Short Sales A fund may not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount
to the securities sold short, and provided that transactions
in futures contracts and options are not deemed to
constitute selling securities short.
- --------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin, except to
obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on
margin.
- --------------------------------------------------------------------------------
Futures and Options A fund may enter into futures contracts and write and buy
put and call options relating to futures contracts. A fund
may not, however, enter into leveraged futures transactions
if it would be possible for the fund to lose more money than
it invested.
- --------------------------------------------------------------------------------
Issuers with A fund may invest up 10% of its assets in the securities of
Limited Operating issues with limited operating histories. An issuer is
Histories considered to have a limited operating history if that
issuer has a record of less than three years of continuous
operation. Periods of capital formation, incubation,
consolidations, and research and development may be
considered in determining whether a particular issuer has a
record of three years of continuous operation.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the funds of securities issued by insurance companies,
broker-dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership. Neither the SEC nor any other agency of the
federal or state government participates in or supervises the management of the
funds or their 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. For purposes of determining industry groups in connection with this
restriction, the SEC ordinarily uses the Standard Industry Classification codes
developed by the U.S. Office of Management and Budget. In the interest of
ensuring adequate diversification, the funds monitor industry concentration
using a more restrictive list of industry groups than that recommended by the
SEC. The advisor believes 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
that may otherwise be available to them under the Investment Company Act.
PORTFOLIO TURNOVER
The portfolio turnover rates of the funds will be shown in the Financial
Highlights table in the Prospectus.
The fund managers will purchase and sell securities without regard to the
length of time the security has been held. Accordingly, the funds' rates of
portfolio turnover may be substantial.
The fund managers intend to purchase a given security whenever they believe
it will contribute to the stated objective of the fund. In order to achieve each
fund's investment objectives, the managers may 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 managers believe that
the security is not fulfilling its purpose, either because, among other things,
it did not live up to the managers' 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 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,
it should be expected that the funds will, under most circumstances, be
essentially fully invested in equity securities.
Because investment decisions are based on the anticipated contribution of the
security in question to a fund's objectives, the managers believe that the rate
of portfolio turnover is irrelevant when they believe a change is in order to
achieve the objectives. As a result, a fund's annual portfolio turnover rate
cannot be anticipated and may be higher than other mutual funds with similar
investment objectives. Higher turnover would generate correspondingly greater
brokerage commissions, which is a cost the funds pay directly. Portfolio
turnover also may affect the character of capital gains realized and distributed
by the fund, if any, because short-term capital gains are taxable as ordinary
income. This disclosure regarding portfolio turnover is a statement of
fundamental policy and may be changed only by a vote of the shareholders.
Because the managers do not take portfolio turnover rate into account in
making investment decisions, (1) the managers have 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 representative
of the rates that will be attained in the future.
MANAGEMENT
The Board of Directors
The Board of Directors oversees the management of the funds and meets at
least quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired the advisor to do so.
Two-thirds of the directors are independent of the funds' advisor, that is, they
are not employed by and have no financial interest in the advisor.
The individuals listed in the table below whose names are marked by an
asterisk (*) are interested persons of the funds (as defined in the Investment
Company Act) by virtue of, among other considerations, their affiliation with
either the funds; the advisor, American Century Investment Management, Inc.
(ACIM); the funds' agent for transfer and administrative services, American
Century Services Corporation (ACSC); the parent corporation, American Century
Companies, Inc. (ACC) or ACC's subsidiaries; the funds' distribution agent and
co-administrator, Funds Distributor, Inc. (FDI); or other funds advised by the
advisor. Each director listed below serves as a director of six registered
investment companies in the American Century family of funds, which are also
advised by the advisor.
<TABLE>
<CAPTION>
Name (Age) Position(s) Held With Fund Principal Occupation(s) during Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
James E. Stowers, Jr.* (75) Director, Chairman, Director and controlling shareholder, ACC,
4500 Main Street Chairman of the Board Chairman and Director, ACIM, ACSC and ACIS(1)
Kansas City, MO 64111
- ------------------------------------------------------------------------------------------------------------------------------------
James E. Stowers III*(40) Director Director and Chief Executive Officer, ACC, ACIM, ACSC and
4500 Main Street ACIS(2)
Kansas City, MO 64111
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas A. Brown (59) Director Director of Plains States Development, Applied Industrial
4500 Main Street Technologies, Inc., a corporation engaged in the sale of
Kansas City, MO 64111 bearings and power transmission products
- ------------------------------------------------------------------------------------------------------------------------------------
Robert W. Doering, M.D. (67) Director Retired, formerly a general surgeon
4500 Main Street
Kansas City, MO 64111
- ------------------------------------------------------------------------------------------------------------------------------------
Andrea C. Hall, Ph.D. (54) Director Senior Vice President and Associate Director, Midwest
4500 Main Street Research Institute
Kansas City, MO 64111
- ------------------------------------------------------------------------------------------------------------------------------------
D.D. (Del) Hock (64) Director Retired, formerly Chairman, Public Service Company of
4500 Main Street Colorado; Director, Service Tech, Inc., Hathaway
Kansas City, MO 64111 Corporation, and J.D. Edwards & Company
- ------------------------------------------------------------------------------------------------------------------------------------
Donald H. Pratt (61) Director Chairman and Director, Butler Manufacturing Company
4500 Main Street Vice Chairman Director, Atlas-Copco North America Inc.
Kansas City, MO 64111 of the Board
- ------------------------------------------------------------------------------------------------------------------------------------
Lloyd T. Silver, Jr. (71) Director President, LSC, Inc., manufacturer's representative
4500 Main Street
Kansas City, MO 64111
- ------------------------------------------------------------------------------------------------------------------------------------
M. Jeannine Strandjord (53) Director Senior Vice President, Finance, Sprint Corporation;
4500 Main Street Director, DST Systems, Inc.
Kansas City, MO 64111
- ------------------------------------------------------------------------------------------------------------------------------------
(1)Father of James E. Stowers III
(2)Son of James E. Stowers, Jr.
Committees
The Board has four standing committees to oversee specific functions of the
funds' operations. Information about these committees appears in the table
below. The director first named serves as chairman of the committee.
Committee Members Function of Committee
- --------------------------- ----------------------------- --------------------------------------------------------------------------
- --------------------------- ----------------------------- --------------------------------------------------------------------------
Executive James E. Stowers, Jr. The Executive Committee performs the functions of the Board of
James E. Stowers III Directors between Board meetings, subject to the limitations on its
Donald H. Pratt 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.
- --------------------------- ----------------------------- --------------------------------------------------------------------------
- --------------------------- ----------------------------- --------------------------------------------------------------------------
Compliance Thomas A. Brown The Compliance Committee reviews the results of the funds' compliance
Donald H. Pratt testing program, reviews quarterly reports from the advisor to the Board
Lloyd T. Silver, Jr. regarding various compliance matters and monitors the implementation of
Andrea C. Hall, Ph.D. the funds' Code of Ethics, including any violations thereof.
- --------------------------- ----------------------------- --------------------------------------------------------------------------
- --------------------------- ----------------------------- --------------------------------------------------------------------------
Audit M. Jeannine Strandjord The Audit Committee recommends the engagement of the funds' independent
Robert W. Doering, M.D. auditors and oversees its activities. The committee receives reports from
D.D. (Del) Hock the advisor's Internal Audit Department, which is accountable to the
committee. The committee also receives reporting about compliance matters
affecting the funds.
- --------------------------- ----------------------------- --------------------------------------------------------------------------
- --------------------------- ----------------------------- --------------------------------------------------------------------------
Nominating Donald H. Pratt The Nominating Committee primarily considers and recommends individuals
Andrea C. Hall, Ph.D. for nomination as directors. The names of potential director candidates
D.D. (Del) Hock are drawn from a number of sources, including recommendations from
members of the board, management and shareholders. The 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.
- --------------------------- ----------------------------- --------------------------------------------------------------------------
</TABLE>
Compensation of Directors
The directors also serve as directors for five American Century investment
companies other than the corporation. Each director who is not an interested
person as defined in the Investment Company Act receives compensation for
service as a member of the Board of all six such companies based on a schedule
that takes into account the number of meetings attended and the assets of the
funds for which the meetings are held. These fees and expenses are divided among
the six investment companies based, in part, upon their relative net assets.
Under the terms of the management agreement with the advisor, the funds are
responsible for paying such fees and expenses.
The following table shows the aggregate compensation paid by the corporation
for the periods indicated and by the six investment companies served by this
Board to each director who is not an interested person as defined in the
Investment Company Act.
Aggregate Director Compensation for Fiscal Year Ended October 31, 1999
- --------------------------------------------------------------------------------
Total Total Compensation
Compensation from the
from the American Century
Name of Director Funds (1) Family of Funds(2)
- ---------------- --------- ------------------
Thomas A. Brown $ $
Robert W. Doering, M.D.
Andrea C. Hall, Ph.D. Info not yet available
D.D. (Del) Hock
Donald H. Pratt
Lloyd T. Silver, Jr.
M. Jeannine Strandjord
- --------------------------------------------------------------------------------
1 Includes compensation paid to the directors during the fiscal year ended
October 31, 1999, and also includes amounts deferred at the election of the
directors under the American Century Mutual Funds Deferred Compensation Plan for
Non-Interested Directors and Trustees.
2 Includes compensation paid by the six investment company members of the
American Century family of funds served by this Board.
The funds have adopted the American Century Deferred Compensation Plan for
Non-Interested Directors and Trustees. Under the plan, the independent directors
may defer receipt of all or any part of the fees to be paid to them for serving
as directors of the funds.
All deferred fees are credited to an account established in the name of the
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 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 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, the funds have 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 funds. The plan may be terminated at any time
by the administrative committee of the plan. If terminated, all deferred fee
account balances will be paid in a lump sum.
No deferred fees were paid to any director under the plan during the fiscal
year ended October 31, 1999.
Officers
Background information for the officers of the funds is provided in the
following table. All persons named as officers of the funds also serve in
similar capacities for the 12 other investment companies advised by ACIM. Not
all officers of the funds are listed; only those officers with policy-making
functions for the funds are listed. No officer is compensated for his or her
service as an officer of the funds. The individuals listed in the following
table are interested persons of the funds (as defined in the Investment Company
Act) by virtue of, among other considerations, their affiliation with either the
funds; ACC; ACC's subsidiaries (including ACIM and ACSC); or the funds'
distributor (FDI).
<TABLE>
<CAPTION>
Name (Age) Positions Held With Principal Occupation(s)
Address Fund During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
George A. Rio (44) President Executive Vice President and Director of Client Services, FDI
60 State St. (March 1998 to present)
Boston, MA 02109 Senior Vice President and Senior Key Account Manager, Putnam
Mutual Funds (June 1995 to March 1998)
Director Business Development, First Data Corporation
(May 1994 to June 1995)
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Kelley (34) Vice President Vice President and Associate General Counsel, FDI (July 1996 to
60 State St. present)
Boston, MA 02109 Assistant Counsel, Forum Financial Group (April 1994 to July 1996)
- ------------------------------------------------------------------------------------------------------------------------------------
Mary A. Nelson (35) Vice President Vice President and Manager of Treasury Services and
60 State St. Administration, FDI (1994 to present)
Boston, MA 02109
- ------------------------------------------------------------------------------------------------------------------------------------
Maryanne Roepke, CPA (43) Vice President and Senior Vice President, Treasurer and Principal Accounting
9300 Ward Parkway Treasurer Officer, ACSC
Kansas City, MO 64111
- ------------------------------------------------------------------------------------------------------------------------------------
David C. Tucker (41) Vice President Senior Vice President and General Counsel, ACSC and ACIM
4500 Main St. (June 1998 to present)
Kansas City, MO 64111 General Counsel, ACC (June 1998 to present)
Consultant to mutual fund industry (May 1997 to April 1998)
Vice President and General Counsel, Janus Companies (1990 to 1997)
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Paul Carrigan, Jr. (50) Secretary Secretary, ACC (December 1998 to present)
4500 Main St. Director of Legal Operations, ACSC (February 1996 to present)
Kansas City, MO 64111 Board Communications Manager, The Benham Company
(April 1994 to January 1996)
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C. Jean Wade (35) Controller Controller-Fund Accounting, ACSC
9300 Ward Parkway
Kansas City, MO 64114
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Merele A. May (36) Controller Vice President, Controller-Fund Accounting, ACSC
9300 Ward Parkway
Kansas City, MO 64114
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Jon Zindel (32) Tax Officer Director of Taxation, ACSC (since 1996)
9300 Ward Parkway Tax Manager, PricewaterhouseCoopers LLP (1989)
Kansas City, MO 64114
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</TABLE>
SERVICE PROVIDERS
The funds have no employees. To conduct the funds' day-to-day activities, the
funds have hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds and is described below.
ACIM and ACSC, are both wholly owned by ACC. James E. Stowers Jr., Chairman
of ACC, controls ACC by virtue of his ownership of a majority of its voting
stock.
INVESTMENT ADVISOR
A description of the responsibilities of the advisor appears in the
Prospectus under the heading "Management." For the services provided to the
funds, the advisor receives a monthly fee based on a percentage of the average
net assets of the fund as described in the Prospectus.
On the first business day of each month, the funds pay a management fee to
the advisor 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 a fund's net assets during the
previous month. This number is then multiplied by a fraction, the numerator of
which is the number of days in the previous month and the denominator of which
is 365 (366 in leap years).
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (1) the funds'
Board of Directors, or by the vote of a majority of outstanding votes (as
defined in the Investment Company Act) and (2) the vote of a majority of the
directors of the funds who are not parties to the agreement or interested
persons of the advisor, 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 outstanding votes, on 60 days' written notice to the advisor, and
that it shall be automatically terminated if it is assigned.
The management agreement provides that the advisor shall not be liable to the
funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the advisor 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 the funds and also for other
clients advised by the advisor. 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 fund, or in different
amounts and at different times for more than one but less than all clients or
funds. In addition, purchases or sales of the same security may be made for two
or more clients or funds on the same date. Such transactions will be allocated
among clients in a manner believed by the advisor 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 advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The Board of Directors
has approved the policy of the advisor 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
advisor 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 management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.
Other Advisory Relationships
In addition to managing the funds, the advisor also serves as an investment
advisor to seven institutional accounts and to the following registered
investment companies:
American Century World Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Variable Portfolios, Inc.
American Century Capital Portfolios, Inc.
American Century Strategic Asset Allocations, Inc.
American Century Municipal Trust
American Century Government Income Trust
American Century Investment Trust
American Century Target Maturities Trust
American Century Quantitative Equity Funds
American Century International Bond Funds
American Century California Tax-Free and Municipal Funds
TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, serves as transfer agent and dividend-paying agent for the
funds. It provides physical facilities, computer hardware and software and
personnel, for the day-to-day administration of the funds and of the advisor.
The advisor pays ACSC for such services.
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 advisor.
Pursuant to a Sub-Administration Agreement with the advisor, Funds
Distributor, Inc. (FDI) serves as the co-administrator for the funds. FDI is
responsible for (i) providing certain officers of the funds and (ii) reviewing
and filing marketing and sales literature on behalf of the funds. The fees and
expenses of FDI are paid by the advisor out of its unified fee.
DISTRIBUTOR
The funds' shares are distributed by FDI, a registered broker-dealer. The
distributor is a wholly owned indirect subsidiary of Boston Institutional Group,
Inc. The distributor's principal business address is 60 State Street, Suite
1300, Boston, Massachusetts 02109.
The distributor is the principal underwriter of the funds' shares. The
distributor makes a continuous, best-efforts underwriting of the funds' shares.
This means that the distributor has no liability for unsold shares.
OTHER SERVICE PROVIDERS
CUSTODIAN BANKS
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York
10003-9598, and Commerce Bank, N.A., 1000 Walnut, 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 AUDITORS
Deloitte & Touche LLP is the independent auditor of the funds. The address of
Deloitte & Touche LLP is 1010 Grand Boulevard, Kansas City, Missouri 64106. As
the independent auditor of the funds, Deloitte & Touche LLP provides services
including (1) audit of the annual financial statements for each fund, (2)
assistance and consultation in connection with SEC filings and (3) review of the
annual federal income tax return filed for each fund.
BROKERAGE ALLOCATION
Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers 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 advisor may take into consideration the factors discussed below when
selecting brokers.
The advisor receives statistical and other information and services,
including research, without cost from brokers and dealers. The advisor evaluates
such information and services, together with all other information that it may
have, in supervising and managing the investments 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 advisor
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 advisor. The advisor does not utilize brokers that provide such information
and services for the purpose of reducing the expense of providing required
services to the funds.
The brokerage commissions paid by the funds may exceed those that 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 advisor in servicing all of its accounts, and
not all such services may be used by the advisor in managing the portfolios of
the funds.
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 advisor 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 their over-the-counter
transactions with principal market makers, but also may deal on a brokerage
basis when utilizing electronic trading networks or as circumstances warrant.
INFORMATION ABOUT FUND SHARES
Each of the funds is a series of shares issued by the corporation, and shares
of each fund have equal voting rights. In addition, each series (or fund) may be
divided into separate classes. See "Multiple Class Structure," which follows.
Additional funds and classes may be added without a shareholder vote.
Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
corporation's (i.e., all funds') outstanding shares may be able to elect a Board
of Directors. The corporation undertakes dollar-based voting, meaning that the
number of votes a shareholder is entitled to is based upon the dollar amount of
the shareholder's investment. The election of directors is determined by the
votes received from all the corporation's shareholders without regard to whether
a majority of shares of any one fund voted in favor of a particular nominee or
all nominees as a group.
The assets belonging to each series or class 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 classes 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.
In the event of complete liquidation or dissolution of the funds,
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.
Each shareholder has rights to dividends and distributions declared by the
fund he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
MULTIPLE CLASS STRUCTURE
The corporation's 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 shares: 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 without any load
or commission, for a single unified management fee. 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 advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower total management
fee. In addition to the management fee, however the Advisor Class shares are
subject to a Master Distribution and Shareholder Services Plan (described
beginning on page 29). The plan has been adopted by the funds' Board of
Directors and initial shareholder in accordance with Rule 12b-1 adopted by the
SEC under the Investment Company Act.
RULE 12b-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Directors and approved by its shareholders. Pursuant to such
rule, the Board of Directors and initial shareholder of the funds' Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan, with respect to the Advisor Class (the Plan). The Plan is described below.
In adopting the Plan, the Board of Directors (including a majority of
directors who are not interested persons of the funds [as defined in the
Investment Company Act], hereafter referred to as the independent directors)
determined that there was a reasonable likelihood that the Plan would benefit
the funds and the shareholders of the affected class. Pursuant to Rule 12b-1,
information with respect to revenues and expenses under the Plan is presented to
the Board of Directors quarterly for its consideration in connection with its
deliberations as to the continuance of the Plan. Continuance of the Plan must be
approved by the Board of Directors (including a majority of the independent
directors) annually. The Plan may be amended by a vote of the Board of Directors
(including a majority of the independent directors), except that the Plan may
not be amended to materially increase the amount to be spent for distribution
without majority approval of the shareholders of the affected class. The Plan
terminates 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 Plan will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers
(NASD).
Master Distribution and Shareholder Services Plan
As described in the Prospectus, the funds' Advisor Class of shares also is
made available to participants in employer-sponsored retirement or savings plans
and to persons purchasing through financial intermediaries such as banks,
broker-dealers and insurance companies. The funds' 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.
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 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'
advisor 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. Pursuant to the Plan, the Advisor
Class shares pay 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 below) and 0.25% of which is paid for distribution
services.
Payments may be made for a variety of shareholder services, including, but
not limited to, (a) receiving, aggregating and processing purchase, exchange and
redemption requests 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 funds'
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 semiannual financial
statements and dividend, distribution and tax notices) to shareholders and/or
other beneficial owners; and (j) providing other similar administrative and
sub-transfer agency 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.
Distribution services include any activity undertaken or expense incurred
that is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to, (a) the payment of sales
commissions, on-going 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 and
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 advisor determines may be
paid for by the funds pursuant to the terms of this agreement and in accordance
with Rule 12b-1 of the Investment Company Act.
BUYING AND SELLING FUND SHARES
Information about buying, selling and exchanging fund shares is contained in
the funds' Prospectus and in Your Guide to American Century Services. The
Prospectus and guide are available to investors without charge and may be
obtained by calling us.
VALUATION OF A FUND'S SECURITIES
Each fund's net asset value per share (NAV) is calculated as of the close of
business of the New York Stock Exchange (the Exchange), usually at 4 p.m.
Eastern time on each day the Exchange is open for business. The Exchange
typically observes the following holidays: New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Although the funds expect the same
holidays to be observed in the future, the Exchange may modify its holiday
schedule at any time.
The advisor typically completes its trading on behalf of each fund in various
markets before the Exchange closes for the day. Each fund's NAV is calculated by
adding the value of all portfolio securities and other assets, deducting
liabilities and dividing the result by the number of shares outstanding.
Expenses and interest earned on portfolio securities are accrued daily.
The portfolio securities of the funds, 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 generally are 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.
Because there are hundreds of thousands of municipal issues outstanding, and
the majority of them do not trade daily, the prices provided by pricing services
for these types of securities are generally determined without regard to bid or
last sale prices. In valuing securities, the pricing services generally take
into account institutional trading activity, trading in similar groups of
securities, and any developments related to specific securities. The methods
used by the pricing service and the valuations so established are reviewed by
the advisor under the general supervision of the Board of Directors. There are a
number of pricing services available, and the advisor, on the basis of ongoing
evaluation of these services, may use other pricing services or discontinue the
use of any pricing service in whole or in part.
Securities maturing within 60 days of the valuation date may be valued at
cost, plus or minus any amortized discount or premium, unless the directors
determine that this would not result in fair valuation of a given security.
Other assets and securities for which quotations are not readily available are
valued in good faith at their fair value using methods approved 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 translated 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.
Trading of these securities in foreign markets may not take place on every
exchange business day. In addition, trading may take place in various foreign
markets on Saturdays or on other days when the exchange is not open and on which
the funds' net asset values are not calculated. Therefore, such calculations do
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 funds'
portfolios may be affected on days when shares of the funds may not be purchased
or redeemed.
TAXES
FEDERAL INCOME TAX
Each fund intends to qualify annually as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code).
By so qualifying, a fund will be exempt from federal income taxes to the extent
that it distributes substantially all of its net investment income and net
realized capital gains (if any) to shareholders. If a fund fails to qualify as a
regulated investment company, it will be liable for taxes, significantly
reducing its distributions to shareholders and eliminating shareholders' ability
to treat distributions of the funds in the manner they were realized by the
funds.
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. The dividends from net income may qualify for the 70%
dividends-received deduction for corporations to the extent that the fund held
shares receiving the dividend for more than 45 days.
Distributions from gains on assets held longer than 12 months are taxable as
long-term gains regardless of the length of time you have held the shares.
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 distributions of long-term capital gains 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 with
respect to 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 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. In order for you to utilize the foreign tax credit, you must
have held your shares for 16 days or more during the 30-day period, beginning 15
days prior to the ex-dividend date for the mutual fund shares. The mutual fund
must meet a similar holding period requirement with respect to foreign
securities to which a dividend is attributable. Any portion of the foreign tax
credit that is ineligible as a result of the fund not meeting the holding period
requirement will be separately disclosed and may be eligible as an itemized
deduction.
If a fund purchases the securities of certain foreign investment funds or
trusts called passive foreign investment companies (PFIC), 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 also may 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 and distribute them to shareholders. Any
distribution attributable to a PFIC is characterized as ordinary income.
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, either American Century or your financial intermediary is
required by federal law to withhold and remit 31% of reportable payments (which
may include dividends, capital gains distributions and redemptions) to the IRS.
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 generally will recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. 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.
STATE AND LOCAL TAXES
Distributions also may 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.
HOW FUND PERFORMANCE INFORMATION IS CALCULATED
The funds may quote performance in various ways. Fund performance may be
shown by presenting one or more performance measurements, including cumulative
total return, average annual total return or yield.
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.
Total returns quoted in advertising and sales literature reflect all aspects
of a fund's return, including the effect of reinvesting dividends and capital
gain distributions (if any) and any change in the fund's NAV during the period.
Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in a fund during a
stated period and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant throughout the period. For example, a cumulative total return
of 100% over 10 years would produce an average annual return of 7.18%, which is
the steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
In addition to average annual total returns, each fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period, including periods other than one, five and 10
years. Average annual and cumulative total returns may be quoted as percentages
or as dollar amounts and may be calculated for a single investment, a series of
investments, or a series of redemptions over any time period. Total returns may
be broken down into their components of income and capital (including capital
gains and changes in share price) to illustrate the relationship of these
factors and their contributions to total return.
As new funds, performance information for the funds is not available as of
the date of this Statement of Additional Information.
PERFORMANCE COMPARISONS
The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that, unlike the American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to: U.S. Treasury bill, note and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated, tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper, Inc. or Morningstar, Inc.; mutual fund
rankings published in major, nationally distributed periodicals; data provided
by the Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills,
and Inflation; major indices of stock market performance; and indices and
historical data supplied by major securities brokerage or investment advisory
firms. The funds also may utilize reprints from newspapers and magazines
furnished by third parties to illustrate historical performance or to provide
general information about the funds.
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 who have invested in one or more of the
funds. The funds also may include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any of the funds.
MULTIPLE CLASS PERFORMANCE ADVERTISING
Pursuant to the Multiple Class Plan, the funds may issue additional classes
of existing funds or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the advisor
may, in compliance with SEC and NASD rules, regulations and guidelines, market
the new class of shares using the historical performance information of the
original class of shares. When quoting performance information for the new class
of shares for periods prior to the first full quarter after inception, the
original class' performance will be restated to reflect the expenses of the new
class, and for periods after the first full quarter after inception, actual
performance of the new class will be used.
More information about the funds is contained in these documents
Annual and Semiannual Reports
These contain more information about the funds' investments and the market
conditions and investment strategies that significantly affected the funds'
performance during the most recent fiscal period. The annual and semiannual
reports are incorporated by reference into this SAI. This means that these are
legally part of this SAI.
You can receive a free copy of the annual and semiannual reports, and ask
questions about the funds and your accounts, by contacting American Century at
the address or telephone numbers listed below.
If you own or are considering purchasing fund shares through
o an employer-sponsored retirement plan
o a bank
o a broker-dealer
o an insurance company
o another financial intermediary
you can receive the annual and semiannual reports directly from them.
You also can get information about the funds from the Securities and Exchange
Commission (SEC).
o In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
o On the Internet www.sec.gov
o By mail SEC Public Reference Section
Washington, D.C.
20549-6009
(The SEC will charge a
fee for copying the
documents.)
Investment Company Act File No. 811-0816
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200
SH-PRS-xxxxx 9911
<PAGE>
PART C. OTHER INFORMATION.
ITEM 23. Exhibits (all exhibits not filed herewith are being incorporated
herein by reference)
(a) (1) Articles of Incorporation of Twentieth Century Investors, Inc.,
dated June 26, 1990 (filed electronically as Exhibit b1a to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996).
(2) Articles of Amendment of Twentieth Century Investors, Inc., dated
November 19, 1990 (filed electronically as Exhibit b1b to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996).
(3) 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 Exhibit b1c to Post-Effective Amendment No. 73
on Form N-1A on February 29, 1996).
(4) Articles of Amendment of Twentieth Century Investors, Inc., dated
August 10, 1993 (filed electronically as Exhibit b1d to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996).
(5) Articles Supplementary of Twentieth Century Investors, Inc.,
dated September 3, 1993 (filed electronically as Exhibit b1e to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996).
(6) Articles Supplementary of Twentieth Century Investors, Inc.,
dated April 24, 1995 (filed electronically as Exhibit b1f to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996).
(7) Articles Supplementary of Twentieth Century Investors, Inc.,
dated October 11, 1995 (filed electronically as Exhibit b1g to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996).
(8) Articles Supplementary of Twentieth Century Investors, Inc.,
dated January 22, 1996 (filed electronically as Exhibit b1h to
Post-Effective Amendment No. 73 on Form N-1A on February 29,
1996).
(9) Articles Supplementary of Twentieth Century Investors, Inc.,
dated March 11, 1996 (filed electronically as Exhibit b1i to
Post-Effective Amendment No. 75 on Form N-1A on June 14, 1996).
(10) Articles Supplementary of Twentieth Century Investors, Inc. dated
September 9, 1996 is included herein.
(11) Articles of Amendment of Twentieth Century Investors, Inc., dated
December 2, 1996 (filed electronically as Exhibit b1j to
Post-Effective Amendment No. 76 on Form N-1A on February 28,
1997).
(12) Articles Supplementary of American Century Mutual Funds, Inc.,
dated December 2, 1996 (filed electronically as Exhibit b1k to
Post-Effective Amendment No. 76 on Form N-1A on February 28,
1997).
(13) Articles Supplementary of American Century Mutual Funds, Inc.,
dated July 28, 1997 (filed electronically as Exhibit b1l to
Post-Effective Amendment No. 78 on Form N-1A on February 26,
1998).
(14) Articles Supplementary of American Century Mutual Funds, Inc.,
dated November 28, 1997 (filed electronically as Exhibit a13 to
Post-Effective Amendment No. 83 on Form N-1A on February 26,
1999).
(15) Certificate of Correction to Articles Supplementary of American
Century Mutual Funds, Inc., dated December 18, 1997 (filed
electronically as Exhibit a14 to Post-Effective Amendment No. 83
on Form N-1A on February 26, 1999).
(16) Articles Supplementary of American Century Mutual Funds, Inc.,
dated December 18, 1997 (filed electronically as Exhibit b1m to
Post-Effective Amendment No. 78 on Form N-1A on February 26,
1998).
(17) Articles Supplementary of American Century Mutual Funds, Inc.,
dated January 25, 1999 (filed electronically as Exhibit a16 to
Post-Effective Amendment No. 83 on Form N-1A on February 26,
1999).
(18) Articles Supplementary of American Century Mutual Funds, Inc.,
dated February 16, 1999 (filed electronically as Exhibit a17 to
Post-Effective Amendment No. 83 on Form N-1A on February 26,
1999).
(19) Articles Supplementary of American Century Mutual Funds, Inc. (to
be filed by amendment).
(b) (1) By-laws of Twentieth Century Investors, Inc. (filed
electronically as Exhibit b2 to Post-Effective Amendment No. 73
on Form N-1A on February 29, 1996).
(2) Amendment to Bylaws of American Century Mutual Funds, Inc. (filed
electronically as Exhibit b2b to Post-Effective Amendment No. 9
on Form N-1A of American Century Capital Portfolios, Inc., File
No. 33-64872, on February 17, 1998).
(c) Registrant hereby incorporates by reference, as though set forth fully
herein, Article Fifth, Article Seventh, and Article Eighth, of
Registrants Articles of Incorporation, appearing as Exhibit (a)(1) to
Post-Effective Amendment No. 76 on Form N-1A of the Registrant, and
Article Fifth of Registrants Articles of Amendment, appearing as
Exhibit (a)(4) to Post-Effective Amendment No. 76 to the Registration
Statement on February 28, 1997; and Sections 3, 4, 5, 6, 7, 8, 9, 10,
11, 22, 24, 25, 30, 31, 33, 39, 45 and 46 of Registrants By-Laws
appearing as Exhibit (b)(1) to Post-Effective Amendment No. 73 on Form
N-1A, and Sections 25, 30 & 31 of Registrants By-Laws appearing as
Exhibit (b)(2) to Post-Effective Amendment No. 9 on Form N-1A of
American Century Capital Portfolios, Inc., Commission No. 33-64872.
(d) (1) Management Agreement between American Century Mutual Funds, Inc.
and American Century Investment Management, Inc. dated August 1,
1997 (filed electronically as Exhibit b5 to Post-Effective
Amendment No. 78 on Form N-1A on February 26, 1998).
(2) Addendum to Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc.,
dated February 16, 1999 (filed electronically as Exhibit d2 to
Post-Effective Amendment No. 83 on Form N-1A on February 26,
1999).
(3) Addendum to Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc. (to
be filed by amendment).
(e) (1) Distribution Agreement between American Century Mutual Funds,
Inc. and Funds Distributor, Inc. dated January 15, 1998 (filed
electronically as Exhibit b6 to Post-Effective Amendment No. 28
on Form N-1A of American Century Target Maturities Trust, File
No. 2-94608, on January 30, 1998).
(2) Amendment No. 1 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated June
1, 1998 (filed electronically as Exhibit b6b to Post-Effective
Amendment No. 11 to the Registration Statement of American
Century Capital Portfolios, Inc., File No. 33-64872, on June 26,
1998).
(3) Amendment No. 2 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated
December 1, 1998 (filed electronically as Exhibit b6c to
Post-Effective Amendment No. 12 to the Registration Statement of
American Century World Mutual Funds, Inc., File No. 33-39242, on
November 13, 1998).
(4) Amendment No. 3 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated
January 29, 1999 (filed electronically as Exhibit e4 to
Post-Effective Amendment No. 24 to the Registration Statement of
American Century Variable Portfolios, Inc., File No. 33-14567, on
January 15, 1999).
(5) Amendment No. 4 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated July
30, 1999 (filed electronically as Exhibit e5 to Post-Effective
Amendment No. 16 to the Registration Statement of American
Century Capital Portfolios, Inc., File No. 33-64872, on July 29,
1999).
(6) Amendment No. 5 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. (to be
filed by amendment).
(f) Not Applicable.
(g) (1) Global Custody Agreement between The Chase Manhattan Bank and the
Twentieth Century and Benham funds, dated August 9, 1996 (filed
electronically as Exhibit 8 to Post-Effective Amendment No. 31 on
Form N-1A of American Century Government Income Trust, File No.
2-99222, on February 7, 1997).
(2) Master Agreement between Commerce Bank, N.A. and Twentieth
Century Services, Inc. dated January 22, 1997 (filed
electronically as Exhibit 8e to Post-Effective Amendment No. 76
on Form N-1A on February 28, 1997).
(h) (1) Transfer Agency Agreement between Twentieth Century Investors,
Inc. and Twentieth Century Services, Inc. dated March 1, 1991
(filed electronically as Exhibit 9 to Post-Effective Amendment
No. 76 on Form N-1A on February 28, 1997).
(2) Credit Agreement between American Century Funds and The Chase
Manhattan Bank, as Administrative Agent dated as of December 18,
1998 (filed electronically as Exhibit h2 to Post-Effective
Amendment No. 37 to the Registration Statement of American
Century Government Income Trust on May 7, 1999, File No.
2-99222).
(i) Opinion and Consent of Counsel (to be filed by amendment).
(j) Power of Attorney dated February 19, 1999 (filed electronically as
Exhibit j2 to Post-Effective Amendment No. 83 on Form N-1A on February
26, 1999).
(k) Not applicable.
(l) Not applicable.
(m) (1) 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 Exhibit b15a to
Post-Effective Amendment No. 9 on Form N-1A of American Century
Capital Portfolios, Inc., File No. 33-64872, on February 17,
1998).
(2) Amendment No. 1 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc.
(Advisor Class) dated June 13, 1997 (filed electronically as
Exhibit b15d to Post-Effective Amendment No. 77 on Form N-1A on
July 17, 1997).
(3) Amendment No. 2 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc.
(Advisor Class) dated September 30, 1997 (filed electronically as
Exhibit b15c to Post-Effective Amendment No. 78 on Form N-1A on
February 26, 1998).
(4) Amendment No. 3 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc.
(Advisor Class) dated June 30, 1998 (filed electronically as
Exhibit b15e to Post-Effective Amendment No. 11 on Form N-1A of
American Century Capital Portfolios, Inc., File No. 33-64872, on
June 26, 1998).
(5) Amendment No. 4 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc.
(Advisor Class) dated November 13, 1998 (filed electronically as
Exhibit b15e to Post-Effective Amendment No. 12 on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, on
November 13, 1998).
(6) Amendment No. 5 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc.
(Advisor Class) dated February 16, 1999 (filed electronically as
Exhibit m6 to Post-Effective Amendment No. 83 on Form N-1A on
February 26, 1999).
(7) Amendment No. 6 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc.
(Advisor Class) dated July 30, 1999 (filed electronically as
Exhibit m7 to Post-Effective Amendment No. 16 on Form N-1A of
American Century Capital Portfolios, Inc., File No. 33-64872, on
July 29, 1999).
(8) Amendment No. 7 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American
Century Mutual Funds, Inc., American Century Strategic Asset
Allocations, Inc. and American Century World Mutual Funds, Inc.
(Advisor Class) (to be filed by amendment).
(9) 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 Exhibit b15b to Post-Effective Amendment
No. 9 on Form N-1A of American Century Capital Portfolios, Inc.,
File No. 33-64872, on February 17, 1998).
(n) Not applicable.
(o) (1) 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
Exhibit b18b to Post-Effective Amendment 9 on Form N-1A of
American Century Capital Portfolios, Inc., File No. 33-64872, on
February 17, 1998).
(2) Amendment No. 1 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated June 13, 1997 (filed
electronically as Exhibit b18b to Post-Effective Amendment No. 77
on Form N-1A on July 17, 1997).
(3) Amendment No. 2 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated September 30, 1997 (filed
electronically as Exhibit b18c to Post-Effective Amendment No. 78
on Form N-1A on February 26, 1998).
(4) Amendment No. 3 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated June 30, 1998 (filed
electronically as Exhibit b18d to Post-Effective Amendment No. 11
on Form N-1A of American Century Capital Portfolios, Inc., File
No. 33-64872, on June 26, 1998).
(5) Amendment No. 4 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated November 13, 1998 (filed
electronically as Exhibit b18e to Post-Effective Amendment No. 12
on Form N-1A of American Century World Mutual Funds, Inc., File
No. 33-39242, on November 13, 1998).
(6) Amendment No. 5 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated January 29, 1999 (filed
electronically as Exhibit b18f to Post-Effective Amendment No. 14
on Form N-1A of American Century Capital Portfolios, Inc., File
No. 33-64872, on December 29, 1998).
(7) Amendment No. 6 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. dated July 30, 1999 (filed
electronically as Exhibit o7 to Post-Effective Amendment No. 16
on Form N-1A of American Century Capital Portfolios, Inc., File
No. 33-64872, on July 29, 1999).
(8) Amendment No. 7 to Multiple Class Plan of American Century
Capital Portfolios, Inc., American Century Mutual Funds, Inc.,
American Century Strategic Asset Allocations, Inc. and American
Century World Mutual Funds, Inc. (to be filed by amendment).
ITEM 24. Persons Controlled by or Under Common Control with Registrant.
Not Applicable.
ITEM 25. 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 26. Business and Other Connections of Investment Advisor.
None.
ITEM 27. Principal Underwriters.
(a) Funds Distributor, Inc. (the "Distributor") acts as principal underwriter
for the following investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
The Distributor is registered with the Securities and Exchange Commission
as a broker-dealer and is a member of the National Association of Securities
Dealers. The Distributor is located at 60 State Street, Suite 1300, Boston,
Massachusetts 02109. The Distributor is an indirect wholly-owned subsidiary of
Boston Institutional Group, Inc., a holding company all of whose outstanding
shares are owned by key employees.
(b) The following is a list of the executive officers, directors and partners of
the Distributor:
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions and Offices with Positions and Offices with
Underwriter Registrant
<S> <C> <C>
Marie E. Connolly Director, President and Chief none
Executive Officer
George A. Rio Executive Vice President President, Principal Executive
and Principal Financial Officer
Donald R. Roberson Executive Vice President none
William S. Nichols Executive Vice President none
Margaret W. Chambers Senior Vice President, General None
Counsel, Chief Compliance
Officer, Secretary and Clerk
Joseph F. Tower, III Director, Senior Vice President, None
Treasurer and Chief Financial
Officer
Paula R. David Senior Vice President None
Gary S. MacDonald Senior Vice President None
Judith K. Benson Senior Vice President None
William J. Nutt Chairman and Director None
- --------------------
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109
</TABLE>
(c) Not applicable.
ITEM 28. 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 29. Management Services
Not Applicable.
ITEM 30. Undertakings.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 85 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kansas City, State of
Missouri on the 1st day of September, 1999.
American Century Mutual Funds, Inc.
(Registrant)
By: /*/George A. Rio
George A. Rio
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 85 has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
*George A. Rio President, Principal Executive September 1, 1999
George A. Rio and Principal Financial Officer
*Maryanne Roepke Vice President and Treasurer September 1, 1999
Maryanne Roepke
*James E. Stowers, Jr. Chairman of the Board and September 1, 1999
James E. Stowers, Jr. Director
*James E. Stowers III Director September 1, 1999
James E. Stowers III
*Thomas A. Brown Director September 1, 1999
Thomas A. Brown
*Robert W. Doering, M.D. Director September 1, 1999
Robert W. Doering, M.D.
*Andrea C. Hall, Ph.D. Director September 1, 1999
Andrea C. Hall, Ph.D.
*Donald H. Pratt Director September 1, 1999
Donald H. Pratt
*Lloyd T. Silver, Jr. Director September 1, 1999
Lloyd T. Silver, Jr.
*M. Jeannine Strandjord Director September 1, 1999
M. Jeannine Strandjord
*D. D. (Del) Hock Director September 1, 1999
D. D. (Del) Hock
*By /s/Charles A. Etherington
Charles A. Etherington
Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER
EX-99.a1 Articles of Incorporation of Twentieth Century Investors, Inc.,
dated June 26, 1990 (filed as Exhibit b1a of Post-Effective
Amendment No. 73 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference).
EX-99.a2 Articles of Amendment of Twentieth Century Investors, Inc., dated
November 19, 1990 (filed as Exhibit b1b of Post-Effective Amendment
No. 73 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference).
EX-99.a3 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 Exhibit b1c of
Post-Effective Amendment No. 73 to the Registration Statement on
Form N-1A of the Registrant, File No. 2-14213, filed on February
29, 1996, and incorporated herein by reference).
EX-99.a4 Articles of Amendment of Twentieth Century Investors, Inc., dated
August 10, 1993 (filed as Exhibit b1d of Post-Effective Amendment
No. 73 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference).
EX-99.a5 Articles Supplementary of Twentieth Century Investors, Inc., dated
September 3, 1993 (filed as Exhibit b1e of Post-Effective Amendment
No. 73 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference).
EX-99.a6 Articles Supplementary of Twentieth Century Investors, Inc., dated
April 28, 1995 (filed as Exhibit b1f of Post-Effective Amendment
No. 73 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference).
EX-99.a7 Articles Supplementary of Twentieth Century Investors, dated
October 11, 1995 (filed as Exhibit b1g of Post-Effective Amendment
No. 73 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference).
EX-99.a8 Articles Supplementary of Twentieth Century Investors, Inc., dated
January 22, 1996 (filed as Exhibit b1h of Post-Effective Amendment
No. 73 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 29, 1996, and
incorporated herein by reference).
EX-99.a9 Articles Supplementary of Twentieth Century Investors, Inc., dated
March 11, 1996 (filed as Exhibit b1i of Post-Effective Amendment
No. 75 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on June 14, 1996, and
incorporated herein by reference).
EX-99.a10 Articles Supplementary of Twentieth Century Investors, Inc. dated
September 9, 1996 is included herein.
EX-99.a11 Articles of Amendment of Twentieth Century Investors, Inc. dated
December 2, 1996 (filed as Exhibit b1j of Post-Effective Amendment
No. 76 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 28, 1997, and
incorporated herein by reference).
EX-99.a12 Articles Supplementary of American Century Mutual Funds, Inc. dated
December 2, 1996 (filed as Exhibit b1k of Post-Effective Amendment
No. 76 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 28, 1997, and
incorporated herein by reference).
EX-99.a13 Articles Supplementary of American Century Mutual Funds, Inc. dated
July 28, 1997 (filed as Exhibit b1l of Post-Effective Amendment No.
78 to the Registration Statement on Form N-1A of the Registrant,
File No. 2-14213, filed on February 26, 1998, and incorporated
herein by reference).
EX-99.a14 Articles Supplementary of American Century Mutual Funds, Inc. dated
November 28, 1997 (filed as Exhibit a13 of Post-Effective Amendment
No. 83 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 26, 1999, and
incorporated herein by reference).
EX-99.a15 Certificate of Correction to Articles Supplementary of American
Century Mutual Funds, Inc. dated December 18, 1997 (filed as
Exhibit a14 of Post-Effective Amendment No. 83 to the Registration
Statement on Form N-1A of the Registrant, File No. 2-14213, filed
on February 26, 1999, and incorporated herein by reference).
EX-99.a16 Articles Supplementary of American Century Mutual Funds, Inc. dated
December 18, 1997 (filed as Exhibit b1m of Post-Effective Amendment
No. 78 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, (filed on February 26, 1998, and
incorporated herein by reference).
EX-99.a17 Articles Supplementary of American Century Mutual Funds, Inc. dated
January 25, 1999 (filed as Exhibit a16 of Post-Effective Amendment
No. 83 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 26, 1999, and
incorporated herein by reference).
EX-99.a18 Articles Supplementary of American Century Mutual Funds, Inc. dated
February 16, 1999 (filed as Exhibit a17 of Post-Effective Amendment
No. 83 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 26, 1999, and
incorporated herein by reference).
EX-99.a19 Articles Supplementary of American Century Mutual Funds, Inc. (to
be filed by amendment).
EX-99.b1 Bylaws of Twentieth Century Investors, Inc. (filed as Exhibit b2 of
Post-Effective Amendment No. 73 to the Registration Statement on
Form N-1A of the Registrant, File No. 2-14213, filed on February
29, 1996, and incorporated herein by reference).
EX-99.b2 Amendment of Bylaws of American Century Mutual Funds, Inc. (filed
as Exhibit b2b of Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872, filed on February 17, 1998,
and incorporated herein by reference).
EX-99.d1 Management Agreement between American Century Mutual Funds, Inc.
and American Century Investment Management, Inc. dated August 1,
1997 (filed as Exhibit b5 of Post-Effective Amendment No. 78 to the
Registration Statement on Form N-1A of the Registrant, File No.
2-14213, filed on February 26, 1998, and incorporated herein by
reference).
EX-99.d2 Addendum to Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc. dated
February 16, 1999 (filed as Exhibit d2 of Post-Effective Amendment
No. 83 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 26, 1999, and
incorporated herein by reference).
EX-99.d3 Addendum to Management Agreement between American Century Mutual
Funds, Inc. and American Century Investment Management, Inc. (to be
filed by amendment).
EX-99.e1 Distribution Agreement between American Century Mutual Funds, Inc.
and Funds Distributor, dated January 15, 1998 (filed as Exhibit b6
of Post-Effective Amendment No. 30 to the Registration Statement on
Form N-1A of American Century Target Maturities Trust, File No.
2-94608, filed on January 30, 1998, and incorporated herein by
reference).
EX-99.e2 Amendment No. 1 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated June
1, 1998 (filed as Exhibit b6b of Post-Effective Amendment No. 11 to
the Registration Statement on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872, filed on June 26, 1998, and
incorporated herein by reference).
EX-99.e3 Amendment No. 2 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated
December 1, 1998 (filed as Exhibit b6c of Post-Effective Amendment
No. 12 to the Registration Statement on Form N-1A of American
Century World Mutual Funds, Inc., File No. 33-39242, filed on
November 13, 1998, and incorporated herein by reference).
EX-99.e4 Amendment No. 3 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated
January 29, 1999 (filed as Exhibit e4 of Post-Effective Amendment
No. 24 to the Registration Statement on Form N-1A of American
Century Variable Portfolios, Inc., File No. 33-14567, filed on
January 15, 1999, and incorporated herein by reference).
EX-99.e5 Amendment No. 4 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. dated July
30, 1999 (filed as Exhibit e5 of Post-Effective Amendment No. 16 to
the Registration Statement on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872, filed on July 29, 1999, and
incorporated herein by reference).
EX-99.e6 Amendment No. 5 to the Distribution Agreement between American
Century Mutual Funds, Inc. and Funds Distributor, Inc. (to be filed
by amendment).
EX-99.g1 Global Custody Agreement between The Chase Manhattan Bank and the
Twentieth Century and Benham funds, dated August 9, 1996 (filed as
Exhibit 8 of Post-Effective Amendment No. 31 to the Registration
Statement on Form N-1A of American Century Government Income Trust,
File No. 2-99222, filed on February 7, 1997, and incorporated
herein by reference).
EX-99.g2 Master Agreement between Commerce Bank, N.A. and Twentieth Century
Services, Inc. dated January 22, 1997 (filed as Exhibit 8e of
Post-Effective Amendment No. 76 to the Registration Statement on
Form N-1A of the Registrant, File No. 2-14213, filed on February
28, 1997, and incorporated herein by reference).
EX-99.h1 Transfer Agency Agreement dated as of March 1, 1991, by and between
Twentieth Century Investors, Inc. and Twentieth Century Services,
Inc. (filed as Exhibit 9 of Post-Effective Amendment No. 76 to the
Registration Statement on Form N-1A of the Registrant, File No.
2-14213, filed on February 28, 1997, and incorporated herein by
reference).
EX-99.h2 Credit Agreement between American Century Funds and The Chase
Manhattan Bank, as Administrative Agent dated as of December 18,
1998 (filed electronically as Exhibit h2 to Post-Effective
Amendment No. 37 to the Registration Statement on Form N-1A of
American Century Government Income Trust, File No. 2-99222, filed
on May 7, 1999, and incorporated herein by reference).
EX-99.i Opinion and Consent of Counsel (to be filed by amendment).
EX-99.j Power of Attorney dated February 19, 1999 (filed as Exhibit j2 of
Post-Effective Amendment No. 83 to the Registration Statement on
Form N-1A of the Registrant, File No. 2-14213, filed on February
26, 1999, and incorporated herein by reference).
EX-99.m1 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 Exhibit b15a of Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A of
American Century Capital Portfolios, Inc., File No. 33-64872, filed
on February 17, 1998, and incorporated herein by reference).
EX-99.m2 Amendment No. 1 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated June 13, 1997 (filed as Exhibit b15d of Post-Effective
Amendment No. 77 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on July 17, 1997, and
incorporated herein by reference).
EX-99.m3 Amendment No. 2 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated September 30, 1997 (filed as Exhibit b15c of Post-Effective
Amendment No. 78 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 26, 1998, and
incorporated herein by reference).
EX-99.m4 Amendment No. 3 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated June 30, 1998 (filed as Exhibit b15e of Post-Effective
Amendment No. 11 to the Registration Statement on Form N-1A of
American Century Capital Portfolios, Inc., File No. 33-64872, filed
on June 26, 1998, and incorporated herein by reference).
EX-99.m5 Amendment No. 4 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated November 13, 1998 (filed as Exhibit b15e of Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242, filed
on November 13, 1998, and incorporated herein by reference).
EX-99.m6 Amendment No. 5 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated February 16, 1999 (filed as Exhibit m6 of Post-Effective
Amendment No. 83 to the Registration Statement on Form N-1A of the
Registrant, File No. 2-14213, filed on February 26, 1999, and
incorporated herein by reference).
EX-99.m7 Amendment No. 6 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
dated July 30, 1999 (filed electronically as Exhibit m7 to
Post-Effective Amendment No. 16 on Form N-1A of American Century
Capital Portfolios, Inc., File No. 33-64872, on July 29, 1999, and
incorporated herein by reference).
EX-99.m8 Amendment No. 7 to Master Distribution and Shareholder Services
Plan of American Century Capital Portfolios, Inc., American Century
Mutual Funds, Inc., American Century Strategic Asset Allocations,
Inc. and American Century World Mutual Funds, Inc. (Advisor Class)
(to be filed by amendment).
EX-99.m9 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
Exhibit b15b of Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A of American Century Capital Portfolios,
Inc., File No. 33-64872, filed on February 17, 1998, and
incorporated herein by reference).
EX-99.o1 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 Exhibit b18b of Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A of
American Century Capital Portfolios, Inc., File No. 33-64872, filed
on February 17, 1998, and incorporated herein by reference).
EX-99.o2 Amendment No. 1 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated June 13, 1997 (filed as Exhibit b18b
of Post-Effective Amendment No. 77 to the Registration Statement on
Form N-1A of the Registrant, File No. 2-14213, filed on July 17,
1997, and incorporated herein by reference).
EX-99.o3 Amendment No. 2 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated September 30, 1997 (filed as Exhibit
b18c of Post-Effective Amendment No. 78 to the Registration
Statement on Form N-1A of the Registrant, File No. 2-14213, filed
on February 26, 1998, and incorporated herein by reference).
EX-99.o4 Amendment No. 3 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated June 30, 1998 (filed as Exhibit b18d
of Post-Effective Amendment No. 11 to the Registration Statement on
Form N-1A of American Century Capital Portfolios, Inc., File No.
33-64872, filed on June 26, 1998, and incorporated herein by
reference).
EX-99.o5 Amendment No. 4 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated November 13, 1998 (filed as Exhibit
b18e of Post-Effective Amendment No. 12 to the Registration
Statement on Form N-1A of American Century World Mutual Funds,
Inc., File No. 33-39242, filed on November 13, 1998, and
incorporated herein by reference).
EX-99.o6 Amendment No. 5 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated January 29, 1999 (filed as Exhibit
b18f of Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1A of the Registrant, File No. 33-64872, filed
on December 29, 1998, and incorporated herein by reference).
EX-99.o7 Amendment No. 6 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. dated July 30, 1999 (filed electronically
as Exhibit o7 to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872, on July 29, 1999, and
incorporated herein by reference).
EX-99.o8 Amendment No. 7 to Multiple Class Plan of American Century Capital
Portfolios, Inc., American Century Mutual Funds, Inc., American
Century Strategic Asset Allocations, Inc. and American Century
World Mutual Funds, Inc. (to be filed by amendment).
TWENTIETH CENTURY INVESTORS, INC.
ARTICLES SUPPLEMENTARY
TWENTIETH CENTURY INVESTORS, 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: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article SEVENTH of the Articles of Incorporation of the
Corporation, the Board of Directors of the Corporation has duly established a
new series of shares titled Twentieth Century New Opportunities Fund
(hereinafter referred to as a "Series") for the Corporation's stock and has
allocated One Hundred Million (100,000,000) shares of the Eleven Billion One
Hundred Million (11,100,000,000) shares of authorized capital stock of the
Corporation, par value One Cent ($.01) per share, for an aggregate par value of
One Million Dollars ($1,000,000) to the new Series. As a result of the action
taken by the Board of Directors referenced in this Article FIRST of these
Articles Supplementary, the seventeen (17) Series of stock of the Corporation
and the number of shares and aggregate par value of each is as follows:
SERIES NUMBER OF SHARES AGGREGATE PAR VALUE
- ------ ---------------- -------------------
Growth Investors 1,000,000,000 $10,000,000
Select Investors 500,000,000 5,000,000
Ultra Investors 1,500,000,000 15,000,000
Vista Investors 1,000,000,000 10,000,000
Heritage Investors 500,000,000 5,000,000
Giftrust Investors 200,000,000 2,000,000
Balanced Investors 200,000,000 2,000,000
Cash Reserve 4,000,000,000 40,000,000
U.S. Governments Short-Term 200,000,000 2,000,000
Long-Term Bond 200,000,000 2,000,000
Tax-Exempt Intermediate-Term 200,000,000 2,000,000
Tax-Exempt Long-Term 200,000,000 2,000,000
Tax Exempt Short-Term 200,000,000 2,000,000
U.S. Governments Intermediate-Term 200,000,000 2,000,000
Limited Term Bond 200,000,000 2,000,000
Intermediate-Term Bond 200,000,000 2,000,000
Twentieth Century New Opportunities Fund 100,000,000 1,000,000
The par value of each share of stock in each Series is One Cent ($0.01) per
share.
SECOND: Pursuant to authority expressly vested in the Board of
Directors by Section 2-605(a)(4) of the Maryland General Corporation Law and by
Article FIFTH and Article SEVENTH of the Articles of Incorporation, the Board of
Directors of the Corporation (a) has duly established multiple classes of shares
(each hereinafter referred to as a "Class") for twelve (12) of the Series of the
capital stock of the Corporation and (b) has reallocated the shares designated
to each Series in Article FIRST above among the Classes of shares. As a result
of the action taken by the Board of Directors, the Classes of shares of the
seventeen (17) Series of stock of the Corporation and the number of shares and
aggregate par value of each is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES AGGREGATE
SERIES NAME CLASS NAME BEFORE REALLOCATION AS REALLOCATED PAR VALUE
- ----------- ---------- ------------------- -------------- ---------
<S> <C> <C> <C> <C>
Growth Investors N/A 1,000,00,000 0
Investor 0 500,000,000 $5,000,000
Institutional 0 80,000,000 800,000
Service 0 210,000,000 2,100,000
Advisor 0 210,000,000 2,100,000
Select Investors N/A 500,000,00 0
Investor 0 250,000,000 2,500,000
Institutional 0 41,000,000 410,000
Service 0 105,000,000 1,050,000
Advisor 0 105,000,000 1,050,000
Ultra Investors N/A 1,500,00,000 0
Investor 0 750,000,000 7,500,000
Institutional 0 125,000,000 1,250,000
Service 0 312,500,000 3,125,000
Advisor 0 312,500,000 3,125,000
Vista Investors N/A 1,000,00,000 0
Investor 0 500,000,000 500,000
Institutional 0 80,000,000 800,000
Service 0 210,000,000 2,100,000
Advisor 0 210,000,000 2,100,000
Heritage Investors N/A 500,000,00 0
Investor 0 250,000,000 2,500,000
Institutional 0 41,000,000 410,000
Service 0 105,000,000 1,050,000
Advisor 0 105,000,000 1,050,000
Giftrust Investors N/A 200,000,000 200,000,000 2,000,000
NUMBER OF SHARES NUMBER OF SHARES AGGREGATE
SERIES NAME CLASS NAME BEFORE REALLOCATION AS REALLOCATED PAR VALUE
- ----------- ---------- ------------------- -------------- ---------
Balanced Investors N/A 200,000,000 0
Investor 0 100,000,000 $1,000,000
Institutional 0 16,000,000 160,000
Service 0 50,000,000 500,000
Advisor 0 50,000,000 500,000
Cash Reserve N/A 4,000,000,000 0
Investor 0 2,000,000,000 20,000,000
Service 0 1,000,000,000 10,000,000
Advisor 0 1,000,000,000 10,000,000
U.S. Governments N/A 200,000,000 0
Short-Term Investor 0 100,000,000 1,000,000
Service 0 50,000,000 500,000
Advisor 0 50,000,000 500,000
Long-Term Bond N/A 200,000,000 0
Investor 0 100,000,000 1,000,000
Service 0 50,000,000 500,000
Advisor 0 50,000,000 500,000
Tax-Exempt N/A 200,000,000 200,000,000 2,000,000
Intermediate-Bond
Tax-Exempt N/A 200,000,000 200,000,000 2,000,000
Long-Term
Tax-Exempt N/A 200,000,000 200,000,000 2,000,000
Short-Term
U.S. Governments N/A 200,000,000 0
Intermediate-Term Investor 0 100,000,000 1,000,000
Service 0 50,000,000 500,000
Advisor 0 50,000,000 500,000
Limited Term Bond N/A 200,000,000 0
Investor 0 100,000,000 1,000,000
Service 0 50,000,000 500,000
Advisor 0 50,000,000 500,000
NUMBER OF SHARES NUMBER OF SHARES AGGREGATE
SERIES NAME CLASS NAME BEFORE REALLOCATION AS REALLOCATED PAR VALUE
- ----------- ---------- ------------------- -------------- ---------
Intermediate-Term N/A 200,000,000 0
Bond Investor 0 100,000,000 $1,000,000
Service 0 50,000,000 500,000
Advisor 0 50,000,000 500,000
Twentieth Century N/A 100,00,000 100,000,000 1,000,000
New Opportunities
Fund
</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 dividing into Series the authorized capital stock of the Corporation
and allocating shares to each Series as set forth in these Articles
Supplementary.
SIXTH: The Board of Directors of the Corporation duly adopted
resolutions authorizing the new Series and allocating shares to the Series, as
set forth in Article FIRST, and dividing the Series of capital stock of the
Corporation into Classes and reallocating shares to each Class, as set forth in
Article SECOND.
IN WITNESS WHEREOF, TWENTIETH CENTURY INVESTORS, INC. has caused these
Articles Supplementary to be signed and acknowledged in its name and on its
behalf by its Vice President and its corporate seal to be hereunto affixed and
attested to by its Secretary on this 9th day of September, 1996.
TWENTIETH CENTURY
ATTEST: INVESTORS, INC.
/*/Patrick A. Looby By: /*/William M. Lyons
Name: Patrick A. Looby Name: William M. Lyons
Title: Secretary Title: Executive Vice President
THE UNDERSIGNED Executive Vice President of TWENTIETH CENTURY
INVESTORS, 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: September 9, 1996
/*/William M. Lyons
William M. Lyons, Executive Vice President
