As filed with the Securities and Exchange Commission on January 16, 1996
1933 Act File No. 33-14567; 1940 Act File No. 811-5188
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 _X__
Pre-Effective Amendment No.____ ____
Post-Effective Amendment No._17_ _X__
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X__
Amendment No._17_
TCI PORTFOLIOS, INC.
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(Exact Name of Registrant as Specified in Charter)
Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 816-531-5575
James E. Stowers, Jr.
Twentieth Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Name and address of Agent for service)
Approximate Date of Proposed Public Offering: April 1, 1996
It is proposed that this filing become effective:
____ immediately upon filing pursuant to paragraph (b) of Rule 485
____ on [date] pursuant to paragraph (b) of Rule 485
____ 60 days after filing pursuant to paragraph (a) of Rule 485
____ on [date] pursuant to paragraph (a)(1) of Rule 485
____ 75 days afer filing pursuant to paragraph (a)(2) of Rule 485
_X__ on April 1, 1996, pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the
fiscal year ended December 31, 1994, was filed on February 28, 1995.
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CROSS REFERENCE SHEET
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<S> <C> <C> <C> <C> <C> <C>
ITEM PAGE PAGE PAGE PAGE PAGE
NO. NO. NO. NO. NO. NO.
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TCI TCI TCI TCI TCI
Growth Value Bal- Advan- Inter-
Part A. Pros- Pros- anced tage national
pectus pectus Pros- Pros- Pros-
pectus pectus pectus
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1. Cover Page Cover Cover Cover Cover Cover
Page Page Page Page Page
2. Synopsis -- -- -- -- --
3. Condensed Financial Information 3 -- 3 3 3
4. General Description of Registrant 11 13-14 13 13-14 14
5. Management of the Fund 10-11 12-13 12-13 12-13 12-13
6. Capital Stock and Other Securities 11 13 13-14 13-14 13-14
7. Purchase of Securities Being Offered 8 10 11 11 11
8. Redemption or Repurchase 8 10 11 11 11
9. Pending Legal Proceedings -- -- -- -- --
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Part B. - Statement of Additional Information
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10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information --
13. Investment Objectives and Policies 2-8
14. Management of the Fund 9-12
15. Control Persons and Principal Holders of
Securities 12-13
16. Investment Advisory and Other Services 11-12
17. Brokerage Allocation 13-14
18. Capital Stock and Other Securities 12
19. Purchase, Redemptions and Pricing of
Securities Being Offered --
20. Tax Status --
21. Underwriters --
22. Calculation of Performance Data 8-9
23. Financial Statements 14
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TCI PORTFOLIOS, INC.
TCI Growth
Prospectus
APRIL 1,
1996
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TCI Portfolios, Inc. ("TCI Portfolios") is a mutual fund that offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. The fund currently offers five portfolios or
series. TCI Growth is described in this prospectus. The other series are
described in separate prospectuses. TCI Growth is sometimes hereinafter referred
to as the "fund." You should consult the prospectus of the separate account of
the specific insurance product that accompanies this prospectus to see which
series of TCI Portfolios are available for purchase for such insurance product.
The investment objective of TCI Growth is capital growth. The fund will
seek to achieve its investment objective by investing primarily in common stocks
that are considered by management to have better-than-average prospects for
appreciation. There can be no assurance that the fund will achieve its
investment objective.
Shares of the fund may be purchased only by insurance companies for the
purpose of funding variable annuity or variable life insurance contracts. This
prospectus should be read in conjunction with the prospectus of the separate
account of the specific insurance product that accompanies this prospectus.
Additional information is included in the statement of additional
information dated April 1, 1996, and filed with the Securities and Exchange
Commission. It is incorporated in this prospectus by reference. To obtain a
copy, or to make any other inquiries, call or write:
TCI Portfolios, Inc.
4500 Main Street * P.O. Box 419385
Kansas City, Mo. 64141-6385 * 1-800-345-3533
Local and international calls: 816-531-5575
Telecommunications device for the deaf:
1-800-345-1833 * In Missouri: 816-753-0070
This prospectus gives you information about TCI Portfolios that you should
know before investing. Keep it for future reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
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Financial Highlights.....................................................3
INFORMATION REGARDING THE FUND
Investment Policies of the Fund..........................................4
Shareholders of TCI Portfolios...........................................4
Other Investment Policies................................................4
Repurchase Agreements.................................................4
Portfolio Lending.....................................................5
Foreign Securities....................................................5
Forward Currency Exchange Contracts...................................5
Derivative Securities.................................................6
Short Sales...........................................................7
When-Issued Securities................................................7
Rule 144A Securities..................................................7
Performance Advertising..................................................8
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price..............................................................8
Purchase and Redemption of Shares.....................................8
When Share Price is Determined........................................9
How Share Price is Determined.........................................9
Distributions............................................................9
Taxes...................................................................10
Management..............................................................10
Further Information About
TCI Portfolios, Inc..................................................11
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FINANCIAL HIGHLIGHTS
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The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified
public accountants, whose report appears in the corporation's annual report, which is incorporated by reference into the statement
of additional information. The annual report contains additional performance information and will be available upon request and
without charge.
INCOME FROM
INVESTMENT OPERATIONS DISTRIBUTIONS
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Net Realized
and Unrealized Distributions
Gains (Losses) from Net
Net Asset on Investments Total Distributions Realized
Value, Net and Foreign from from Net Gains on
TCI Beginning Investment Currency Investment Investment Security Total
Growth of Period Income Transactions Operations Income Transactions Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
Nov. 20, 1987
(inception) through
Dec. 31, 1987 $5.00 $ .07 $ .29 $ .36$ (.07) -- $(.07)
Year Ended
Dec. 31, 1988 5.29 .06 (.18) (.12) (.06) -- (.06)
Year Ended
Dec. 31, 1989 5.11 .06 1.41 1.47 (.06) $(.28) (.34)
Year Ended
Dec. 31, 1990 6.24 .06 (.14) (.08) -- -- --
Year Ended
Dec. 31, 1991 6.16 .04 2.51 2.55 (.07) -- (.07)
Year Ended
Dec. 31, 1992 8.64 .02 (.14) (.12) (.052) (.003) (.055)
Year Ended
Dec. 31, 1993 8.47 .03 .84 .87 (.023) -- (.023)
Year Ended
Dec. 31, 1994 9.32 .01 (.12) (.11) (.001) -- (.001)
Year Ended
Dec. 31, 1995 -- -- -- -- -- -- --
(table continued below)
RATIOS/SUPPLEMENTAL DATA
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(table continued) Ratio of Ratio of Net
Net Asset Operating Investment Net Assets,
Value, Expenses Income Portfolio End of
TCI End of Total to Average to Average Turnover Period
Growth Period Return Net Assets Net Assets Rate in thousands)
Nov. 20, 1987
(inception) through
Dec. 31, 1987 $5.29 7.20% 1.00%* 7.2%* --* $ 319
Year Ended
Dec. 31, 1988 5.11 (2.26%) 1.00% 1.95% 354% 6,330
Year Ended
Dec. 31, 1989 6.24 28.70% 1.00% 1.53% 228% 35,222
Year Ended
Dec. 31, 1990 6.16 (1.24%) 1.00% 1.46% 271% 96,726
Year Ended
Dec. 31, 1991 8.64 41.86% 1.00% .62% 182% 255,592
Year Ended
Dec. 31, 1992 8.47 (1.33%) 1.00% .32% 135% 415,005
Year Ended
Dec. 31, 1993 9.32 10.30% 1.00% .35% 87% 775,689
Year Ended
Dec. 31, 1994 9.21 (1.17%) 1.00% .11% 115% 1,002,577
Year Ended
Dec. 31, 1995 -- --% --% -- -- --
*Annualized
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NO PERSON IS AUTHORIZED BY TCI PORTFOLIOS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER
INFORMATION OR REPRESENTATION.
3
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INFORMATION REGARDING THE FUNDS
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INVESTMENT POLICIES OF THE FUND
TCI Portfolios has adopted certain investment restrictions applicable to
the fund that are set forth in the statement of additional information. Those
restrictions, as well as the investment objective of the fund, as identified
on the front cover page, and any other investment policies designated as
"fundamental" in this prospectus or in the statement of additional
information, cannot be changed without the approval of the shareholders
entitled to cast a majority of the outstanding votes of the corporation, as
defined by the Investment Company Act. The fund has implemented additional
investment policies and practices to guide its activities in the pursuit of
its investment objective. These policies and practices, which are described
throughout this prospectus, are not designated as fundamental policies and
may be changed without shareholder approval.
The investment objective of TCI Growth is capital growth. The fund will
seek to achieve its investment objective by investing in common stocks
(including securities convertible into common stocks and other equity
equivalents) and other securities that meet certain fundamental and technical
standards of selection and have, in the opinion of the fund's investment
manager, better than average potential for appreciation. The fund tries to
stay fully invested in such securities, regardless of the movement of stock
prices generally.
The fund may invest in cash and cash equivalents temporarily or when it
is unable to find securities meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least three
years' continuous operation.
SHAREHOLDERS OF TCI PORTFOLIOS
TCI Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although TCI Portfolios does not foresee any disadvantages to contract owners
due to the fact that it offers its shares as an investment medium for both
variable annuity and variable life products, the interests of various
contract owners participating in the funds of TCI Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, TCI Portfolios' board of
directors will monitor events in order to identify any material
irreconcilable conflicts that may possibly arise and to determine what
action, if any, should be taken in response to such conflicts. If a conflict
were to occur, an insurance company separate account might be required to
withdraw its investments in the funds of TCI Portfolios and those funds might
be forced to sell securities at disadvantageous prices to fund such
withdrawal.
OTHER INVESTMENT POLICIES
For additional information regarding the fund and its investment
policies, see "Investment Restrictions Applicable to all Series of Shares" in
the statement of additional information.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise
committed to the purchase of securities pursuant to the investment policy of
the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered as a loan collateralized
by the security purchased. The fund's risk is the ability of the seller to
pay the
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agreed-upon repurchase price on the repurchase date. If the seller defaults,
the fund may incur costs in disposing of the collateral, which would reduce
the amount realized thereon. If the seller seeks relief under the bankruptcy
laws, the disposition of the collateral may be delayed or limited. To the
extent the value of the security decreases, the fund could experience a loss.
The fund will limit repurchase agreement transactions to transactions
with those commercial banks and broker-dealers whose creditworthiness has
been reviewed and found satisfactory by the fund's management pursuant to
criteria adopted by the fund's board of directors.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value
of the securities loaned, or by irrevocable letters of credit. During the
existence of the loan, the fund must continue to receive the equivalent of
the interest and dividends paid by the issuer on the securities loaned and
interest on the investment of the collateral. The fund must have the right to
call the loan and obtain the securities loaned at any time on five days'
notice, including the right to call the loan to enable the fund to vote the
securities. Interest and dividends on loaned securities may not exceed 10% of
the annual gross income of the fund (without offset for realized capital
gains). The portfolio lending policy described in this paragraph is a
fundamental policy that may be changed only by a vote of a majority of the
shareholders of TCI Portfolios.
TCI Portfolios is indemnified against loss on the loans by United States
Trust Company of New York.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities
of foreign issuers when these securities meet its standards of selection. The
fund may make such investments either directly in foreign securities, or
indirectly by purchasing depositary receipts or depositary shares or similar
instruments for foreign securities ("DRs"). DRs are securities that are
issued in and are listed on exchanges or quoted in over-the-counter markets
in one country but represent shares of issuers domiciled in another country.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future
political and economic developments, currency restrictions and devaluations,
securities clearance and settlement procedures, exchange control regulations,
reduced availability of public information concerning issuers, and the fact
that foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY
EXCHANGE CONTRACTS
Some of the securities held by the fund may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars
or the currency of the country where issued (if not U.S. dollars), but have a
value that is dependent upon the performance of a foreign security, as valued
in the currency of its home country. As a result, the value of its portfolio
will be affected by changes in the exchange rate between foreign currencies
and the U.S. dollar, as well as by changes in the market value of the
securities themselves. The performance of foreign currencies relative to the
dollar may be an important factor in the overall performance of the fund.
In order to protect against adverse movements in exchange rates between
currencies, the fund may, for hedging purposes only, enter into forward
currency exchange contracts. A forward currency exchange contract obligates
the fund to
5
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purchase or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract
with respect to a specific purchase or sale of a security, or with respect to
the fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to
the specific purchase or sale of a security denominated in a foreign
currency, the fund can "lock in" an exchange rate between the trade and
settlement dates for that purchase or sale. This practice is sometimes
referred to as "transaction hedging." The fund may enter into transaction
hedging contracts with respect to all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in
value compared to the U.S. dollar, the fund may enter into a foreign currency
exchange contract to sell an amount of foreign currency equal to the value of
some or all of the fund's portfolio securities either denominated in, or
whose value is tied to, that currency. This practice is sometimes referred to
as "portfolio hedging." The fund may not enter into a portfolio hedging
transaction where the fund would be obligated to deliver an amount of foreign
currency in excess of the aggregate value of the fund's portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the investment manager. However, it is anticipated that the
fund will enter into portfolio hedges much less frequently than transaction
hedges.
If the fund enters into a forward contract, the fund, when required,
will instruct its custodian bank to segregate cash or liquid high-grade
securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily,
and if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than
the amount of the fund's commitment. At any given time, no more than 10% of
the fund's assets will be committed to a segregated account in connection
with portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult,
and there is no assurance that any attempt to protect the fund against
adverse currency movements through the use of forward currency exchange
contracts will be successful. In addition, the use of forward currency
exchange contracts may limit the potential gains that might result from a
positive change in the relationship between the foreign currency and the U.S.
dollar.
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. Certain derivative securities are more accurately
described as "index/structured securities." Index/structured securities are
derivative securities whose value or performance is linked to other equity
securities (such as DRs), currencies, interest rates, indexes or other
financial indicators ("reference indexes"). No fund may invest in an
index/structured security unless the reference index or the instrument to
which it relates is an eligible investment for the fund.
The return, interest rate or, unlike most fixed income securities, the
principal amount payable at maturity of an index/structured security may
increase or decrease, depending upon changes in the reference index.
Index/structured securities may be positively or negatively indexed. That
means that an increase in the reference index may produce an increase or
decrease in the return, interest rate or value at maturity of the security.
No purchases will be made of index/structured securities having
"leverage" characteristics. This means that no investments will be made in
securities whose change in return, interest rate or value at maturity is a
multiple of the change in the reference index.
Because their performance is tied to a refer-
6
<PAGE>
ence index, a fund investing in index/structured securities, in addition to
being exposed to the credit risk of the issuer of the security, will also
bear the market risk of changes in the reference index.
The board of directors has approved management'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. Management will report on fund
activity in derivative securities to the board of directors as necessary. In
addition, the board will review management's policy for investments in
derivative securities annually.
SHORT SALES
The fund may engage in short sales if, at the time of the short sale,
the fund owns or has the right to acquire an equal amount of the security
being sold short at no additional cost.
The fund may make a short sale when it wants to sell the security it
owns at a current attractive price, but also wishes to defer recognition of
gain or loss for federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the investment
manager, such purchases will further the investment objectives of the fund.
The price of when-issued securities is established at the time the commitment
to purchase is made. Delivery of and payment for these securities typically
occur 15 to 45 days after the commitment to purchase. Market rates of
interest on debt securities at the time of delivery may be higher or lower
than those contracted for on the when-issued security. Accordingly, the value
of such security may decline prior to delivery, which could result in a loss
to the fund. A separate account consisting of cash or high-quality liquid
debt securities in an amount at least equal to the when-issued commitments
will be established and maintained with the custodian. No income will accrue
to the fund prior to delivery.
RULE 144A SECURITIES
The fund may invest up to 15% of its assets in illiquid securities
(securities that may not be sold within seven days at approximately the price
used in determining the net asset value of fund shares), including restricted
securities. Although securities which may be resold only to qualified
institutional buyers in accordance with the provisions of Rule 144A under the
Securities Act of 1933 are considered "restricted securities," the fund may
purchase Rule 144A securities without regard to the percentage limitations
described above when Rule 144A securities present an attractive investment
opportunity, otherwise meet the fund's criteria of selection, and also meet
the liquidity guidelines established for Rule 144A securities.
With respect to securities eligible for resale under Rule 144A, the
staff of the Securities and Exchange Commission has taken the position that
the liquidity of such securities in the portfolio of a fund offering
redeemable securities is a question of fact for the board of directors to
determine, such determination to be based upon a consideration of the readily
available trading markets and the review of any contractual restrictions.
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 TCI
Portfolios has delegated the day-to-day function of determining the liquidity
of 144A securities to the investment manager. The board retains the
responsibility to monitor the implementation of the guidelines and procedures
it has adopted.
Since the secondary market for such securi-
7
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ties will be limited to certain qualified institutional investors, their
liquidity may be limited accordingly and the fund may from time to time hold
a Rule 144A security that is illiquid. In such an event, TCI Portfolios will
consider appropriate remedies to minimize the effect on the fund's liquidity.
PERFORMANCE ADVERTISING
From time to time TCI Portfolios (or the insurance companies that use
TCI Portfolios to fund the benefits of variable annuity or variable life
insurance contracts) may advertise performance data. Fund performance may be
shown by presenting one or more performance measurements, including
cumulative total return and average annual total return.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compounded return over a stated period of time that
would have produced the fund's cumulative total return over the same period
if the fund's performance had remained constant throughout.
TCI Portfolios may also include in advertisements data comparing
performance with the performance of non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations (such as Lipper Analytical Services or Donoghue's Money Fund
Report) and publications that monitor the performance of mutual funds.
Performance information may be quoted numerically or may be represented in a
table, graph or other illustration. In addition, fund performance may be
compared to well-known indices of market performance, including the Standard
& Poor's (S&P) 500 Index, The Dow Jones Industrial Average, Donoghue's Money
Fund Average, the Shearson Lehman Intermediate Government Bond Index, the
constant maturity five-year U.S. Treasury Note Index and the Bank Rate
Monitor National Index of 21/2 -year CD rates. Fund performance may also be
compared to other funds in the Twentieth Century family. It may also be
combined or blended with other funds in the Twentieth Century family, and
that combined or blended performance may be compared to the same indices to
which the individual funds may be compared.
All performance information advertised by TCI Portfolios 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.
PERFORMANCE FIGURES ADVERTISED BY TCI PORTFOLIOS SHOULD NOT BE USED FOR
COMPARATIVE PURPOSES BECAUSE THESE FIGURES WILL NOT INCLUDE CHARGES AND
DEDUCTIONS IMPOSED BY THE INSURANCE COMPANY SEPARATE ACCOUNT UNDER THE
VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS.
ADDITIONAL INFORMATION YOU SHOULD KNOW
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SHARE PRICE
PURCHASE AND
REDEMPTION OF SHARES
For instructions on how to purchase and redeem shares, read the
prospectus of your insurance company's separate account.
Shares of TCI Portfolios are sold and redeemed by TCI Portfolios at
their net asset value next determined after receipt by the insurance company
separate account of the order from the variable annuity or variable life
insurance contract owner to purchase or to redeem. There are no sales
commissions or redemption charges. However, certain sales or deferred sales
charges and other charges may apply to the variable annuity or life insurance
contracts. Those charges are disclosed in the separate account prospectus.
8
<PAGE>
WHEN SHARE PRICE IS DETERMINED
The price of TCI Portfolios' shares is their net asset value. Net asset
value is determined at the close of business of the New York Stock Exchange,
usually 3 p.m. Central time, on each day that the Exchange is open. Requests
to redeem shares and investments received by the separate account before the
close of business of the Exchange are effective, and will receive the price
determined, on the day received. Redemption requests and investments received
thereafter are effective on, and receive the price determined as of, the
close of the Exchange the next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be
summarized as follows:
The portfolio securities of the fund, except as otherwise noted, listed
or traded on a stock exchange are valued at the latest sale price on the
exchange where they are primarily traded. If no sale is reported, the mean of
the latest bid and asked prices is used. Securities traded over the counter
are priced at the mean of the latest bid and asked prices, but will be valued
at the last sale price if required by regulations of the Securities and
Exchange Commission. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith 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.
Pursuant to a determination by TCI Portfolios' board of directors that
such value represents fair value, debt securities with maturities of 60 days
or less are valued at amortized cost. When a security is valued at amortized
cost, it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument.
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 of the New York Stock Exchange,
if that is earlier. That value is then converted to U.S. 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 which was likely to
materially change the net asset value, then that security would be valued at
fair value as determined by the board of directors. Trading of securities in
foreign markets may not take place on every New York Stock Exchange business
day. In addition, trading may take place in various foreign markets on
Saturdays or on other days when the New York Stock Exchange is not open and
on which the fund's net asset value is not calculated. Therefore, such
calculation does not take place contemporaneously with the determination of
the prices of many of the portfolio securities used in such calculation and
the value of the fund's portfolio may be affected on days when shares of the
fund may not be purchased or redeemed.
DISTRIBUTIONS
Distributions from net investment income and realized securities gains,
if any, generally are declared and paid once a year, but the fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the
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Internal Revenue Code, in all events in a manner consistent with the
provisions of the Investment Company Act. All distributions from the fund
will be reinvested in additional shares.
The board of directors may elect not to distribute capital gains in
whole or in part to take advantage of loss carryovers.
TAXES
TCI Portfolios intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. For a discussion of the tax
status of your variable contract, refer to the prospectus of your insurance
company's separate account.
MANAGEMENT
Under the laws of the State of Maryland, the board of directors is
responsible for managing the business and affairs of TCI Portfolios. Acting
pursuant to an investment advisory agreement entered into with TCI
Portfolios, Investors Research Corporation ("Investors Research") serves as
the investment manager of TCI Portfolios. Its principal place of business is
Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
Investors Research has been providing investment advisory services to
investment companies and institutional investors since 1958. Certain
investments may be appropriate for TCI Portfolios and also for other clients
advised by Investors Research. Investment decisions are made with the
intention of achieving the respective investment objectives of Investors
Research's clients 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 in different amounts and at different times for more than one
but less than all clients. In addition, purchases or sales of the same
security may be made for two or more clients on the same date. Such
transactions will be allocated among clients in a manner believed by
Investors Research 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 TCI Portfolios.
Investors Research supervises and manages the investment portfolio of
the fund and directs the purchase and sale of its investment securities.
Investors Research utilizes a team of portfolio managers, assistant portfolio
managers and analysts acting together to manage the assets of the fund. The
team meets regularly to review portfolio holdings and to discuss purchase and
sale activity. The team adjusts holdings in the fund's portfolio as they deem
appropriate in pursuit of the fund's investment objectives. Individual
portfolio manager members of the team may also adjust portfolio holdings of
the funds as necessary between team meetings.
The portfolio manager members of the TCI Growth team and their principal
business experience for the last five years are as follows:
JAMES E. STOWERS III, president and portfolio manager, joined Investors
Research in 1981. Mr. Stowers has been a portfolio manager member of the TCI
Growth team since its inception in 1987.
ROBERT C. PUFF, JR., executive vice president and chief investment
officer, has been a portfolio manager since joining Investors Research in
1983. In his position as Chief Investment Officer, Mr. Puff oversees the
investment activities of all of the teams that manage TCI Portfolios funds.
CHRISTOPHER K. BOYD, vice president and portfolio manager, joined
Investors Research in March 1988 as an investment analyst, a position he held
until December 1990. At that time he was promoted to assistant portfolio
manager and then was promoted to portfolio manager in December 1992.
DEREK FELSKE, vice president and portfolio manager, joined Investors
Research in September 1993 as a portfolio manager. From May 1991 to September
1993, Mr. Felske served as a member of the portfolio management team of RCM
10
<PAGE>
Capital Management, San Francisco, California. Prior to May 1991, Mr.
Felske attended the University of Pennsylvania Wharton School of Business,
where he obtained an MBA in finance.
The activities of Investors Research are subject only to directions of
TCI Portfolios' board of directors. Investors Research pays all the expenses
of TCI Portfolios except brokerage, taxes, interest, fees, expenses of the
non-interested person directors (including counsel fees) and extraordinary
expenses.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of the fund during the year. The fee is paid and
computed on the first business day of each month by multiplying 1% of the
average daily closing net asset values of the shares of the fund during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
Many investment companies pay smaller investment management fees. However,
most if not all of such companies also pay, in addition to an investment
management fee, certain of their own expenses, while almost all of TCI
Portfolios' expenses, as noted above, are paid by Investors Research.
TCI Portfolios and Investors Research have adopted a Code of Ethics (the
"Code"), which restricts personal investing practices by employees of
Investors Research and its affiliates. Among other provisions, the Code
requires that employees with access to information about the purchase or sale
of securities in the fund's portfolios obtain preclearance before executing
personal trades. With respect to portfolio managers and other investment
personnel, the Code prohibits acquisition of securities in an initial public
offering, as well as profits derived from the purchase and sale of the same
security within 60 calendar days. These provisions are designed to ensure
that the interests of fund shareholders come before the interests of the
people who manage those funds.
Twentieth Century Services, Inc., 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend paying agent of TCI
Portfolios. It provides facilities, equipment and personnel to TCI Portfolios
and is paid for such services by Investors Research. Certain administrative
and record keeping services that would otherwise be performed by Twentieth
Century Services, Inc. may be performed by the insurance company that
purchases TCI Portfolios' shares, and Investors Research may pay the
insurance company for such services.
Investors Research and Twentieth Century Services, Inc., are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman and
chief executive officer of TCI Portfolios, controls Twentieth Century
Companies, Inc. by virtue of his ownership of a majority of its common stock.
FURTHER INFORMATION
ABOUT TCI PORTFOLIOS, INC.
TCI Portfolios was organized as a Maryland corporation on June 4, 1987.
It is a diversified, open-end management investment company. Its business and
affairs are managed by its officers under the direction of its board of
directors.
The principal office of TCI Portfolios is 4500 Main Street, P.O. Box
419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail
to that address or by phone to 816-531-5575.
TCI Portfolios issues five series of common stock with a par value of
$.01 per share. The assets belonging to each series of shares are held
separately by the custodian, and in effect each series is a separate fund.
Each share of each series, when issued, is fully paid and non-assessable.
Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except
that certain matters must be voted on by the series of shares affected, and
matters affecting only one series are voted upon only by that series.
Shares have non-cumulative voting rights, which means that holders of
more than 50% of the
11
<PAGE>
net asset value of the shares voting for election of directors can elect all
of the directors if they choose to do so, and, in such event, the holders of
the remaining minority will not be able to elect any person or persons to the
board of directors.
An insurance company issuing a variable contract invested in shares
issued by TCI Portfolios will request voting instructions from contract
holders and will vote shares in proportion to the voting instructions
received.
In the event of the complete liquidation or dissolution of TCI
Portfolios, shareholders of each series of shares shall be entitled to
receive, pro rata, all of the assets less the liabilities of that series.
TCI PORTFOLIOS RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES,
PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE
STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN
THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
12
<PAGE>
TCI PORTFOLIOS, INC.
TCI Growth
Prospectus
April 1, 1996
[company logo]
TCI PORTFOLIOS, INC.
Part of the Twentieth Century
Family of Funds
- -----------------------------------------
P.O. Box 419385
- -----------------------------------------
Kansas City, Missouri
- -----------------------------------------
64141-6385
1-800-345-3533 or 816-531-5575
- -----------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
IN-BKT-4182
9601 Recycled
(C) 1996 Twentieth Century Services, Inc.
<PAGE>
TCI PORTFOLIOS, INC.
TCI Advantage
Prospectus
APRIL 1,
1996
- --------------------------------------------------------------------------------
TCI Portfolios, Inc. ("TCI Portfolios") is a mutual fund that offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. The fund currently offers five portfolios or
series. TCI Advantage is described in this prospectus. The other series are
described in separate prospectuses. TCI Advantage is sometimes hereinafter
referred to as the "fund." You should consult the prospectus of the separate
account of the specific insurance product that accompanies this prospectus to
see which series of TCI Portfolios are available for such insurance product.
The investment objective of TCI Advantage is current income and capital
growth. The fund will seek to achieve its investment objective by investing in
three types of securities. The fund's investment manager intends to invest
approximately (i) 20% of the fund's assets in securities of the United States
government and its agencies and instrumentalities and repurchase agreements
collateralized by such securities with a weighted average maturity of six months
or less, i.e., cash or cash equivalents, (ii) 40% of the fund's assets in fixed
income securities of the United States government and its agencies and
instrumentalities with a weighted average maturity of three to 10 years and
(iii) 40% of the fund's assets in equity securities that are considered by
management to have better-than-average prospects for appreciation. As described
in greater detail in this prospectus, assets will be purchased or sold, as the
case may be, as is necessary in response to changes in market value to maintain
the asset mix of the fund's portfolio at approximately 60% cash, cash
equivalents and fixed income securities and 40% equity securities. There can be
no assurance that the fund will achieve its investment objective.
Shares of the fund may be purchased only by insurance companies for the
purpose of funding variable annuity or variable life insurance contracts. This
prospectus should be read in conjunction with the prospectus of the separate
account of the specific insurance product that accompanies this prospectus.
Additional information is included in the statement of additional
information dated April 1, 1996, and filed with the Securities and Exchange
Commission. It is incorporated in this prospectus by reference. To obtain a
copy, or to make any other inquiries, call or write:
TCI Portfolios, Inc.
4500 Main Street * P.O. Box 419385
Kansas City, Mo. 64141-6385 * 1-800-345-3533
Local and international calls: 816-531-5575
Telecommunications device for the deaf:
1-800-345-1833 * In Missouri: 816-753-0070
This prospectus gives you information about TCI Portfolios that you should
know before investing. Keep it for future reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Financial Highlights.....................................................3
INFORMATION REGARDING THE FUND
Investment Policies of the Fund..........................................4
Shareholders of TCI Portfolios...........................................5
Other Investment Policies................................................6
Fundamentals of Fixed Income Investing................................6
Repurchase Agreements.................................................6
Portfolio Lending.....................................................6
Foreign Securities....................................................7
Forward Currency Exchange Contracts...................................7
Derivative Securities.................................................8
Short Sales...........................................................9
When-Issued Securities................................................9
Rule 144A Securities..................................................9
Performance Advertising..................................................9
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price.............................................................11
Purchase and Redemption of Shares....................................11
When Share Price is Determined.......................................11
How Share Price is Determined........................................11
Distributions...........................................................12
Taxes...................................................................12
Management..............................................................12
Further Information About
TCI Portfolios, Inc..................................................13
2
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified
public accountants, whose report appears in the corporation's annual report, which is incorporated by reference into the statement
of additional information. The annual report contains additional performance information and will be available upon request and
without charge
INCOME FROM
INVESTMENT OPERATIONS DISTRIBUTIONS
--------------------------------------- -----------------------------------------
Net Realized
and
Unrealized Distributions
Gains (Losses) from Net
Net Asset on Investments Total Distributions Realized
Value, Net and Foreign from from Net Gains on
Beginning Investment Currency Investment Investment Security Total
of Period Income Transactions Operations Income Transactions Distributions
TCI
Advantage
<S> <C> <C> <C> <C> <C> <C> <C>
August 1, 1991
(inception) through
Dec. 31, 1991 $5.00 $ .05 $ .64 $ .69 $ (.05) -- $ (.05)
Year Ended
Dec. 31, 1992 5.64 .11 (.32) (.21) (.11) -- (.11)
Year Ended
Dec. 31, 1993 5.32 .11 .25 .36 (.11) -- (.11)
Year Ended
Dec. 31, 1994 5.57 .15 (.09) .06 (.15) -- (.15)
Year Ended
Dec. 31, 1995 -- -- -- -- -- -- --
(table continued below)
RATIOS/SUPPLEMENTAL DATA
(table continued) ----------------------------------------------------
Ratio of Net Net
Ratio of Investment Assets,
Net Asset Operating Income End of
Value, Expenses to Portfolio Period
End of Total to Average Average Turnover (in
Period Return Net Assets Net Assets Rate thousands)
TCI
Advantage
August 1, 1991
(inception) through
Dec. 31, 1991 $5.64 33.14%* 1.00%* 3.14%* 13%* $ 3,069
Year Ended
Dec. 31, 1992 5.32 (3.75%) 1.00% 2.32% 85% 16,580
Year Ended
Dec. 31, 1993 5.57 6.82% 1.00% 2.07% 77% 20,959
Year Ended
Dec. 31, 1994 5.48 1.03% 1.00% 2.65% 57% 22,413
Year Ended
Dec. 31, 1995 -- --% --% -- -- --
*Annualized
- ------------------------------------------------------------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED BY TCI PORTFOLIOS TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR IN OTHER PRINTED OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER INFORMATION OR
REPRESENTATION.
</TABLE>
3
<PAGE>
INFORMATION REGARDING THE FUND
- --------------------------------------------------------------------------------
INVESTMENT POLICIES OF THE FUND
TCI Portfolios has adopted certain investment restrictions applicable to
the fund that are set forth in the statement of additional information. Those
restrictions, as well as the investment objective of the fund, as identified
on the front cover page, and any other investment policies designated as
"fundamental" in this prospectus or in the statement of additional
information, cannot be changed without the approval of the shareholders
entitled to cast a majority of the outstanding votes of the corporation, as
defined by the Investment Company Act. The fund has implemented additional
investment policies and practices to guide its activities in the pursuit of
its investment objective. These policies and practices, which are described
throughout this prospectus, are not designated as fundamental policies and
may be changed without shareholder approval.
The investment objective of TCI Advantage is current income and capital
growth. The fund will seek to achieve its investment objective by investing
in three types of securities. The investment manager intends to invest
approximately 20% of the fund's assets (the "Core Cash" portion) in
securities of the U.S. government, its agencies and instrumentalities
("government securities") with a weighted average maturity of six months or
less, i.e., cash or cash equivalents. The investment manager intends to
invest approximately 40% of the fund's assets (the "Fixed Income" portion) in
fixed income government securities with a weighted average maturity of three
to 10 years. If the investment manager believes, in its discretion, that
market conditions warrant it, some or all of the Fixed Income portion of the
fund's portfolio may be invested in cash or cash equivalents. The remaining
approximately 40% of the fund's assets (the "Equity" portion) will be
invested in equity securities.
When changes in the market value of the fund's assets cause the Equity
portion of the fund to be equal to or less than 35% of the fund's assets, or
to be equal to or greater than 45% of the fund's assets, equity and fixed
income securities will be purchased or sold, as the case may be, so that the
Equity portion will again represent approximately 40% of the fund's assets.
The securities to be purchased for the Core Cash portion and the Fixed
Income portion of the fund will be chosen based on their level of income
production and price stability and will consist only of obligations of the
U.S. government, its agencies and instrumentalities, including
mortgage-related and other asset-backed securities, and repurchase agreements
fully collateralized by such securities.
With regard to such obligations of the U.S. government, its agencies and
instrumentalities, TCI Advantage may invest in (1) direct obligations of the
United States, such as Treasury bills, Treasury notes and U.S. government
bonds, which are supported by the full faith and credit of the United States,
and (2) obligations, including mortgage-related securities, issued or
guaranteed by agencies and instrumentalities of the U.S. government that are
established under an Act of Congress. These agencies and instrumentalities
may include, but are not limited to, the Government National Mortgage
Association, Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, Student Loan Marketing Association, Federal Farm Credit
Banks, Federal Home Loan Banks and Resolution Funding Corporation. The
securities of some of these agencies and instrumentalities, such as the
Government National Mortgage Association, are guaranteed as to principal and
interest by the United States Treasury, and other securities are supported by
the right of the issuer, such as the Federal Home Loan Banks, to borrow from
the Treasury. Other obligations, including those issued by the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation,
are supported only by the credit of the instrumentality.
Mortgage-related securities in which TCI Advantage may invest include
collateralized mortgage obligations ("CMOs") issued by a
4
<PAGE>
U.S. agency or instrumentality. A CMO is a debt security that is
collateralized by a portfolio or pool of mortgages or mortgage-backed
securities. The issuer's obligation to make interest and principal payments
is secured by the underlying pool or portfolio of mortgages or securities.
The market value of mortgage-related securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of
principal and interest by the U.S. government, is not insured. When interest
rates rise, the market value of those securities may decrease in the same
manner as other fixed-rate debt, but when interest rates decline their market
value may not increase as much as other fixed-rate debt instruments because
of the prepayment feature inherent in the mortgages underlying such
securities. If such securities are purchased at a premium, the fund will
suffer a loss if the obligation is prepaid. Prepayments will be reinvested at
prevailing rates, which may be less than the rate paid on such obligation.
For the purpose of determining the average weighted portfolio maturity
of the fund, management shall consider the maturity of a security issued by
the Government National Mortgage Association, or other mortgage-related
security, to be the remaining expected average life of the security. The
average life of such securities is likely to be substantially less than the
original maturity as a result of prepayments of principal of the mortgages
underlying such securities, especially in a declining interest rate
environment.
While there are no maturity restrictions on the debt securities in which
the fund may invest, the weighted average maturity of the Core Cash portion
is expected to be six months or less. Under normal market conditions the
weighted average maturity of the Fixed Income portion will be in the three-to
ten-year range. The manager will actively manage such portion of the fund's
assets, adjusting the weighted average portfolio maturity in response to
expected interest rates. During periods of rising interest rates a shorter
weighted average maturity may be adopted in order to reduce the effect of
fixed income security price declines on the fund's net asset value. When
interest rates are falling and fixed income security prices rising, a longer
weighted average portfolio maturity may be adopted. If the investment manager
believes that market conditions merit it, some or all of the assets in the
Fixed Income portion may be invested in cash and cash equivalents.
With regard to the Equity portion of its portfolio, TCI Advantage will
invest in common stocks (including securities convertible into common stocks
and other equity equivalents) and other securities that meet certain
fundamental and technical standards of selection and have, in the opinion of
the investment manager, better-than-average potential for appreciation.
The Equity portion of the fund may be invested in cash and cash
equivalents, including repurchase agreements, temporarily or when the fund is
unable to find equity securities meeting its criteria of selection. The fund
may purchase equity securities only of companies that have a record of at
least three years' continuous operation.
SHAREHOLDERS OF TCI PORTFOLIOS
TCI Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although TCI Portfolios does not foresee any disadvantages to contract owners
due to the fact that it offers its shares as an investment medium for both
variable annuity and variable life products, the interests of various
contract owners participating in the funds of TCI Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, TCI Portfolios' board of
directors will monitor events in order to identify any material
irreconcilable conflicts that may possibly arise and to determine what
action, if any, should be taken in response to such conflicts. If a conflict
were to occur, an insurance company separate account might be required to
withdraw its investments
5
<PAGE>
in the funds of TCI Portfolios, and those funds might be forced to sell
securities at disadvantageous prices to fund such withdrawal.
OTHER INVESTMENT POLICIES
For additional information regarding the fund and its investment
policies, see "Investment Restrictions Applicable to all Series of Shares" in
the statement of additional information.
FUNDAMENTALS OF FIXED
INCOME INVESTING
Over time, the level of interest rates available in the marketplace
changes. As prevailing rates fall, the prices of fixed income securities,
i.e., securities that trade on a yield basis, rise. On the other hand, when
prevailing interest rates rise, the prices of such securities fall.
Generally, the longer the maturity of a debt security, the higher its
yield and the greater its price volatility. Conversely, the shorter the
maturity, the lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on
fixed income security portfolios. A change in the level of interest rates
causes the net asset value per share of any fixed income security fund,
except money market funds, to change. If sustained over time, it would also
have the impact of raising or lowering the yield of that fund.
In addition to the risk arising from fluctuating interest rate levels,
debt securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond
ratings take into account the relative likelihood that such timely payment
will occur. As a result, lower-rated bonds sell at higher yield levels than
top-rated bonds of similar maturity. In addition, as economic, political and
business developments unfold, lower-quality bonds, which possess lower levels
of protection with regard to timely payment, usually exhibit more price
fluctuation than do higher-quality bonds of maturity.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise
committed to the purchase of securities pursuant to the investment policy of
the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered as a loan collateralized
by the security purchased. The fund's risk is the ability of the seller to
pay the agreed-upon repurchase price on the repurchase date. If the seller
defaults, the fund may incur costs in disposing of the collateral, which
would reduce the amount realized thereon. If the seller seeks relief under
the bankruptcy laws, the disposition of the collateral may be delayed or
limited. To the extent the value of the security decreases, the fund could
experience a loss.
The fund will limit repurchase agreement transactions to transactions
with those commercial banks and broker-dealers whose creditworthiness has
been reviewed and found satisfactory by the fund's management pursuant to
criteria adopted by the fund's board of directors.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current
6
<PAGE>
basis in an amount at least equal to the market value of the securities
loaned or by irrevocable letters of credit. During the existence of the loan,
the fund must continue to receive the equivalent of the interest and
dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan
and obtain the securities loaned at any time on five days' notice, including
the right to call the loan to enable the fund to vote the securities.
Interest and dividends on loaned securities may not exceed 10% of the annual
gross income of the fund (without offset for realized capital gains). The
portfolio lending policy described in this paragraph is a fundamental policy
that may be changed only by a vote of a majority of the shareholders of TCI
Portfolios.
TCI Portfolios is indemnified against loss on the loans by United States
Trust Company of New York.
FOREIGN SECURITIES
The fund may invest in equity securities of foreign issuers when these
securities meet its standards of selection. The fund may make such
investments either directly in foreign securities, or indirectly by
purchasing depositary receipts or depositary shares or similar instruments
for foreign securities ("DRs"). DRs are securities that are issued in and are
listed on exchanges or quoted in over-the-counter markets in one country but
represent shares of issuers domiciled in another country.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future
political and economic developments, currency restrictions and devaluations,
securities clearance and settlement procedures, exchange control regulations,
reduced availability of public information concerning issuers, and the fact
that foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY
EXCHANGE CONTRACTS
Some of the securities held by the fund may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars
or the currency of the country where issued (if not U.S. dollars) but have a
value that is dependent upon the performance of a foreign security, as valued
in the currency of its home country. As a result, the value of its portfolio
will be affected by changes in the exchange rate between foreign currencies
and the U.S. dollar, as well as by changes in the market value of the
securities themselves. The performance of foreign currencies relative to the
dollar may be an important factor in the overall performance of the fund.
In order to protect against adverse movements in exchange rates between
currencies, the fund may, for hedging purposes only, enter into forward cur-
rency exchange contracts. A forward currency ex- change contract obligates
the fund to purchase or sell a specific currency at a future date at a
specific price.
The fund may elect to enter into a forward currency exchange contract
with respect to a specific purchase or sale of a security, or with respect to
the fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to
the specific purchase or sale of a security denominated in a foreign
currency, the fund can "lock in" an exchange rate between the trade and
settlement dates for that purchase or sale. This practice is sometimes
referred to as "transaction hedging." The fund may enter into transaction
hedging contracts with respect to all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in
value compared to the U.S. dollar, the fund may enter into a foreign currency
exchange contract to sell an amount of foreign currency equal to the value of
some or all of the fund's portfolio securities either denominated
7
<PAGE>
in, or whose value is tied to, that currency. This practice is sometimes
referred to as "portfolio hedging." The fund may not enter into a portfolio
hedging transaction where the fund would be obligated to deliver an amount of
foreign currency in excess of the aggregate value of the fund's portfolio
securities or other assets denominated in, or whose value is tied to, that
currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the investment manager. However, it is anticipated that the
fund will enter into portfolio hedges much less frequently than transaction
hedges.
If the fund enters into a forward contract, the fund, when required,
will instruct its custodian bank to segregate cash or liquid high-grade
securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily,
and if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than
the amount of the fund's commitment. At any given time, no more than 10% of
the fund's assets will be committed to a segregated account in connection
with portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult,
and there is no assurance that any attempt to protect the fund against
adverse currency movements through the use of forward currency exchange
contracts will be successful. In addition, the use of forward currency
exchange contracts may limit the potential gains that might result from a
positive change in the relationship between the foreign currency and the U.S.
dollar.
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. Certain derivative securities are more accurately
described as "index/structured securities." Index/structured securities are
derivative securities whose value or performance is linked to other equity
securities (such as DRs), currencies, interest rates, indexes or other
financial indicators ("reference indexes"). No fund may invest in an
index/structured security unless the reference index or the instrument to
which it relates is an eligible investment for the fund.
The return, interest rate or, unlike most fixed income securities, the
principal amount payable at maturity of an index/structured security may
increase or decrease, depending upon changes in the reference index. Index/
structured securities may be positively or negatively indexed. That means
that an increase in the reference index may produce an increase or decrease
in the return, interest rate or value at maturity of the security.
No purchases will be made of index/structured securities having
"leverage" characteristics. This means that no investments will be made in
securities whose change in return, interest rate or value at maturity is a
multiple of the change in the reference index. In no event will an
index/structured security be purchased if its addition to the fund's fixed
income portfolio would cause the expected interest rate characteristics of
its fixed income portfolio to fall outside the expected interest rate
characteristics of a fund having the same permissible weighted average
portfolio maturity range that does not invest in index/structured securities.
Because their performance is tied to a reference index, a fund investing
in index/structured securities, in addition to being exposed to the credit
risk of the issuer of the security, will also bear the market risk of changes
in the reference index.
The board of directors has approved management'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. Management will report on fund
activity in derivative securities to the board of directors as
8
<PAGE>
necessary. In addition, the board will review management's policy for
investments in derivative securities annually.
SHORT SALES
The fund may engage in short sales if, at the time of the short sale,
the fund owns or has the right to acquire an equal amount of the security
being sold short at no additional cost.
The fund may make a short sale when it wants to sell the security it
owns at a current attractive price, but also wishes to defer recognition of
gain or loss for federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the investment
manager, such purchases will further the investment objectives of the fund.
The price of when-issued securities is established at the time the commitment
to purchase is made. Delivery of and payment for these securities typically
occur 15 to 45 days after the commitment to purchase. Market rates of
interest on debt securities at the time of delivery may be higher or lower
than those contracted for on the when-issued security. Accordingly, the value
of such security may decline prior to delivery, which could result in a loss
to the fund. A separate account consisting of cash or high-quality liquid
debt securities in an amount at least equal to the when-issued commitments
will be established and maintained with the custodian. No income will accrue
to the fund prior to delivery.
RULE 144A SECURITIES
The fund may invest up to 15% of its assets in illiquid securities
(securities that may not be sold within seven days at approximately the price
used in determining the net asset value of fund shares), including restricted
securities. Although securities which may be resold only to qualified
institutional buyers in accordance with the provisions of Rule 144A under the
Securities Act of 1933 are considered "restricted securities," the fund may
purchase Rule 144A securities without regard to the percentage limitations
described above when Rule 144A securities present an attractive investment
opportunity, otherwise meet the fund's criteria of selection, and also meet
the liquidity guidelines established for Rule 144A securities.
With respect to securities eligible for resale under Rule 144A, the
staff of the Securities and Exchange Commission has taken the position that
the liquidity of such securities in the portfolio of a fund offering
redeemable securities is a question of fact for the board of directors to
determine, such determination to be based upon a consideration of the readily
available trading markets and the review of any contractual restrictions.
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 TCI
Portfolios has delegated the day-to-day function of determining the liquidity
of 144A securities to the investment manager. The board retains the
responsibility to monitor the implementation of the guidelines and procedures
it has adopted.
Since the secondary market for such securities will be limited to
certain qualified institutional investors, their liquidity may be limited
accordingly and the fund may from time to time hold a Rule 144A security
which is illiquid. In such an event, TCI Portfolios will consider appropriate
remedies to minimize the effect on the fund's liquidity.
PERFORMANCE ADVERTISING
From time to time, TCI Portfolios (or the insurance companies that use
TCI Portfolios to fund the benefits of variable annuity or variable life
insurance contracts) may advertise perfor-
9
<PAGE>
mance data. Fund performance may be shown by presenting one or more
performance measurements, including cumulative total return, average annual
total return, yield and effective yield.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compounded return over a stated period of time that
would have produced the fund's cumulative total return over the same period
if the fund's performance had remained constant throughout.
A quotation of yield reflects the fund's income over a stated period
expressed as a percentage of the fund's share price. Yield is calculated by
adding over a 30-day (or one-month) period all interest and dividend income
(net of fund expenses) calculated on each day's market values, dividing this
sum by the average number of fund shares outstanding during the period, and
expressing the result as a percentage of the fund's share price on the last
day of the 30-day (or one-month) period. The percentage is then annualized.
Capital gains and losses are not included in the calculation. Yields are
calculated according to accounting methods that are standardized for all
stock and bond funds. Because yield accounting methods differ from the
methods used for other accounting purposes, TCI Advantage's yield may not
equal income paid on your shares or the income reported in the fund's
financial statements.
TCI Portfolios also may include in advertisements data comparing
performance with the performance of non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations (such as Lipper Analytical Services or Donoghue's Money Fund
Report) and publications that monitor the performance of mutual funds.
Performance information may be quoted numerically or may be represented in a
table, graph or other illustration. In addition, fund performance may be
compared to well-known indices of market performance, including the Standard
& Poor's (S&P) 500 Index, The Dow Jones Industrial Average, Donoghue's Money
Fund Average, the Shearson Lehman Intermediate Government Bond Index, the
constant maturity five-year U.S. Treasury Note Index and the Bank Rate
Monitor National Index of 21/2-year CD rates. Fund performance may also be
compared to other funds in the Twentieth Century family. It may also be
combined or blended with other funds in the Twentieth Century family, and
that combined or blended performance may be compared to the same indices to
which the individual funds may be compared.
All performance information advertised by TCI Portfolios 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.
PERFORMANCE FIGURES ADVERTISED BY TCI PORTFOLIOS SHOULD NOT BE USED FOR
COMPARATIVE PURPOSES BECAUSE THESE FIGURES WILL NOT INCLUDE CHARGES AND
DEDUCTIONS IMPOSED BY THE INSURANCE COMPANY SEPARATE ACCOUNT UNDER THE
VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS.
10
<PAGE>
ADDITIONAL INFORMATION YOU SHOULD KNOW
- --------------------------------------------------------------------------------
SHARE PRICE
PURCHASE AND
REDEMPTION OF SHARES
For instructions on how to purchase and redeem shares, read the
prospectus of your insurance company's separate account.
Shares of TCI Portfolios are sold and redeemed by TCI Portfolios at
their net asset value next determined after receipt by the insurance company
separate account of the order from the variable annuity or variable life
insurance contract owner to purchase or to redeem. There are no sales
commissions or redemption charges. However, certain sales or deferred sales
charges and other charges may apply to the variable annuity or life insurance
contracts. Those charges are disclosed in the separate account prospectus.
WHEN SHARE PRICE IS DETERMINED
The price of TCI Portfolios' shares is their net asset value. Net asset
value is determined at the close of business of the New York Stock Exchange,
usually 3 p.m. Central time, on each day that the Exchange is open. Requests
to redeem shares and investments received by the separate account before the
close of business of the Exchange are effective, and will receive the price
determined, on the day received. Redemption requests and investments received
thereafter are effective on, and receive the price determined as of, the
close of the Exchange the next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be
summarized as follows:
The portfolio securities of the fund, except as otherwise noted, listed
or traded on a stock exchange are valued at the latest sale price on the
exchange where they are primarily traded. If no sale is reported, the mean of
the latest bid and asked prices is used. Securities traded over the counter
are priced at the mean of the latest bid and asked prices, but will be valued
at the last sale price if required by regulations of the Securities and
Exchange Commission. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith 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.
Pursuant to a determination by TCI Portfolios' board of directors that
such value represents fair value, debt securities with maturities of 60 days
or less are valued at amortized cost. When a security is valued at amortized
cost, it is valued at its cost when purchased and thereafter by assuming a
constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument.
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 of the New York Stock Exchange,
if that is earlier. That value is then converted to U.S. 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 which was likely to
materially change the net asset value, then that security would be valued at
fair value as determined by the board of directors. Trading of securities in
foreign markets may not take place on every New York Stock Exchange business
day.
11
<PAGE>
In addition, trading may take place in various foreign markets on Saturdays
or on other days when the New York Stock Exchange is not open and on which
the fund's net asset value is not calculated. Therefore, such calculation
does not take place contemporaneously with the determination of the prices of
many of the portfolio securities used in such calculation and the value of
the fund's portfolio may be affected on days when shares of the fund may not
be purchased or redeemed.
DISTRIBUTIONS
Distributions from investment income generally are declared and paid
quarterly in March, June, September and December, while distributions from
realized securities gains, if any, generally are declared and paid once a
year. The fund may make distributions on a more frequent basis to comply with
the Internal Revenue Code, in all events in a manner consistent with the
provisions of the Investment Company Act. All distributions from the fund
will be reinvested in additional shares.
The board of directors may elect not to distribute capital gains in
whole or in part to take advantage of loss carryovers.
TAXES
TCI Portfolios intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. For a discussion of the tax
status of your variable contract, refer to the prospectus of your insurance
company's separate account.
MANAGEMENT
Under the laws of the State of Maryland, the board of directors is
responsible for managing the business and affairs of TCI Portfolios. Acting
pursuant to an investment advisory agreement entered into with TCI
Portfolios, Investors Research Corporation ("Investors Research") serves as
the investment manager of TCI Portfolios. Its principal place of business is
Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
Investors Research has been providing investment advisory services to
investment companies and institutional investors since 1958. Certain
investments may be appropriate for TCI Portfolios and also for other clients
advised by Investors Research. Investment decisions are made with the
intention of achieving the respective investment objectives of Investors
Research's clients 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 in different amounts and at different times for more than one
but less than all clients. In addition, purchases or sales of the same
security may be made for two or more clients on the same date. Such
transactions will be allocated among clients in a manner believed by
Investors Research 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 TCI Portfolios.
Investors Research supervises and manages the investment portfolio of
the fund and directs the purchase and sale of its investment securities.
Investors Research utilizes a team of portfolio managers, assistant portfolio
managers and analysts acting together to manage the assets of the fund. The
team meets regularly to review portfolio holdings and to discuss purchase and
sale activity. The team adjusts holdings in the fund's portfolio as they deem
appropriate in pursuit of the fund's investment objectives. Individual
portfolio manager members of the team may also adjust portfolio holdings of
the funds as necessary between team meetings.
The portfolio manager members of the TCI Advantage team and their
principal business experience for the last five years are as follows:
ROBERT C. PUFF, JR., executive vice president and chief investment
officer, has been a portfolio manager since joining Investors
12
<PAGE>
Research in 1983. In his position as Chief Investment Officer, Mr. Puff
oversees the investment activities of all of the teams that manage TCI
Portfolios funds.
CHARLES M. DUBOC, senior vice president and portfolio manager, joined
Investors Research in August 1985 and served as fixed income portfolio
manager from that time until April 1993. In April 1993, Mr. Duboc joined
Investors Research equity investment efforts. He is a member of the team that
manages the equity portion of TCI Advantage.
NORMAN E. HOOPS, senior vice president and fixed income portfolio
manager, joined Investors Research as vice president and portfolio manager in
November 1989. In April 1993, he became senior vice president. He is a member
of the team that manages the fixed income portion of TCI Advantage.
NANCY B. PRIAL, vice president and portfolio manager, joined Investors
Research in February 1994 as a portfolio manager. She is a member of the team
that manages the equity portion of TCI Advantage. For more than four years
prior to joining Investors Research, Ms. Prial served as senior vice
president and portfolio manager at Frontier Capital Management Company,
Boston, Massachusetts.
The activities of Investors Research are subject only to directions of
TCI Portfolios' board of directors. Investors Research pays all the expenses
of TCI Portfolios except brokerage, taxes, interest, fees and expenses of the
non-interested person directors (including counsel fees) and extraordinary
expenses.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of the fund during the year. The fee is paid and
computed on the first business day of each month by multiplying 1% of the
average daily closing net asset values of the shares of the fund during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
Many investment companies pay smaller investment management fees. However,
most if not all of such companies also pay, in addition to an investment
management fee, certain of their own expenses, while almost all of TCI
Portfolios' expenses, as noted above, are paid by Investors Research.
TCI Portfolios' and Investors Research have adopted a Code of Ethics
(the "Code"), which restricts personal investing practices by employees of
Investors Research and its affiliates. Among other provisions, the Code
requires that employees with access to information about the purchase or sale
of securities in the fund's portfolios obtain preclearance before executing
personal trades. With respect to portfolio managers and other investment
personnel, the Code prohibits acquisition of securities in an initial public
offering, as well as profits derived from the purchase and sale of the same
security within 60 calendar days. These provisions are designed to ensure
that the interests of fund shareholders come before the interests of the
people who manage those funds.
Twentieth Century Services, Inc., 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent of TCI
Portfolios. It provides facilities, equipment and personnel to TCI Portfolios
and is paid for such services by Investors Research. Certain administrative
and recordkeeping services that would otherwise be performed by Twentieth
Century Services, Inc. may be performed by the insurance company that
purchases TCI Portfolios' shares, and Investors Research may pay the
insurance company for such services.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman and
chief executive officer of TCI Portfolios, controls Twentieth Century
Companies, Inc. by virtue of his ownership of a majority of its common stock.
FURTHER INFORMATION
ABOUT TCI PORTFOLIOS, INC.
TCI Portfolios was organized as a Maryland
13
<PAGE>
corporation on June 4, 1987. It is a diversified, open-end management
investment company. Its business and affairs are managed by its officers
under the direction of its board of directors.
The principal office of TCI Portfolios is 4500 Main Street, P.O. Box
419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail
to that address or by phone to 816-531-5575.
TCI Portfolios issues five series of common stock with a par value of
$.01 per share. The assets belonging to each series of shares are held
separately by the custodian and, in effect, each series is a separate fund.
Each share of each series, when issued, is fully paid and non-assessable.
Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except
that certain matters must be voted on by the series of shares affected, and
matters affecting only one series are voted upon only by that series.
Shares have non-cumulative voting rights, which means that holders of
more than 50% of the net asset value of the shares voting for election of
directors can elect all of the directors if they choose to do so, and, in
such event, the holders of the remaining minority will not be able to elect
any person or persons to the board of directors.
An insurance company issuing a variable contract invested in shares
issued by TCI Portfolios will request voting instructions from contract
holders and will vote shares in proportion to the voting instructions
received.
In the event of the complete liquidation or dissolution of TCI
Portfolios, shareholders of each series of shares shall be entitled to
receive, pro rata, all of the assets less the liabilities of that series.
TCI PORTFOLIOS RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES,
PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE
STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN
THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
14
<PAGE>
TCI PORTFOLIOS, INC.
TCI Advantage
Prospectus
April 1, 1996
[company logo]
TCI PORTFOLIOS, INC.
Part of the Twentieth Century
Family of Funds
- -----------------------------------
P.O. Box 419385
- -----------------------------------
Kansas City, Missouri
- -----------------------------------
64141-6385
1-800-345-3533 or 816-531-5575
- -----------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
IN-BKT-4184
9601 Recycled
(C) 1996 Twentieth Century Services, Inc.
<PAGE>
TCI PORTFOLIOS, INC.
TCI Balanced
Prospectus
APRIL 1,
1996
- --------------------------------------------------------------------------------
TCI Portfolios, Inc. ("TCI Portfolios") is a mutual fund that offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. The fund currently offers five portfolios or
series. TCI Balanced is described in this prospectus. The other series are
described in separate prospectuses. TCI Balanced is sometimes hereinafter
referred to as the "fund." You should consult the prospectus of the separate
account of the specific insurance product that accompanies this prospectus to
see which series of TCI Portfolios are available for such insurance product.
The investment objective of TCI Balanced is capital growth and current
income. The fund will seek to achieve its investment objective by maintaining
approximately 60% of the assets of TCI Balanced in common stocks that are
considered by management to have better-than-average prospects for appreciation
and the remaining assets in bonds and other fixed income securities. There can
be no assurance that the fund will achieve its investment objective.
Shares of the fund may be purchased only by insurance companies for the
purpose of funding variable annuity or variable life insurance contracts. This
prospectus should be read in conjunction with the prospectus of the separate
account of the specific insurance product that accompanies this prospectus.
Additional information is included in the statement of additional
information dated April 1, 1996, and filed with the Securities and Exchange
Commission. It is incorporated in this prospectus by reference. To obtain a
copy, or to make any other inquiries, call or write:
TCI Portfolios, Inc.
4500 Main Street * P.O. Box 419385
Kansas City, Mo. 64141-6385 * 1-800-345-3533
Local and international calls: 816-531-5575
Telecommunications device for the deaf:
1-800-345-1833 * In Missouri: 816-753-0070
This prospectus gives you information about TCI Portfolios that you should
know before investing. Keep it for future reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Financial Highlights......................................................3
INFORMATION REGARDING THE FUND
Investment Policies of the Fund...........................................4
Shareholders of TCI Portfolios............................................5
Other Investment Policies.................................................6
Fundamentals of Fixed Income Investing.................................6
Repurchase Agreements..................................................6
Portfolio Lending......................................................6
Foreign Securities.....................................................7
Forward Currency Exchange Contracts....................................7
Derivative Securities..................................................8
Short Sales............................................................9
When-Issued Securities.................................................9
Rule 144A Securities...................................................9
Performance Advertising...................................................9
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price..............................................................11
Purchase and Redemption of Shares.....................................11
When Share Price is Determined........................................11
How Share Price is Determined.........................................11
Distributions............................................................12
Taxes....................................................................12
Management...............................................................12
Further Information About
TCI Portfolios, Inc...................................................13
2
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified
public accountants, whose report appears in the corporation's annual report, which is incorporated by reference into the statement
of additional information. The annual report contains additional performance information and will be available upon request and
without charge.
INCOME FROM
INVESTMENT OPERATIONS DISTRIBUTIONS
------------------------------------------------------ -------------------------------------------------
Net Realized
and Unrealized Distributions
Gains (Losses) from Net
Net Asset on Investments Total Distributions Realized
Value, Net and Foreign from from Net Gains on
TCI Beginning Investment Currency Investment Investment Security Total
Balanced of Period Income nsactions Operations Income Transactions Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1991
(inception) through
Dec. 31, 1991 $5.00 $ .08 $1.19 $1.27 $(.08) -- $(.08)
Year Ended
Dec. 31, 1992 6.19 .08 (.45) (.37) (.08) -- (.08)
Year Ended
Dec. 31, 1993 5.74 .11 .33 .44 (.11) -- (.11)
Year Ended
Dec. 31, 1994 6.07 .15 (.11) .04 (.15) -- (.15)
Year Ended
Dec. 31, 1995 -- -- -- -- -- -- --
(table continued below)
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------
(table continued) Ratio of Net Net
Ratio of Investment Assets,
Net Asset Operating Income End of
Value, Expenses to Portfolio Period
TCI End of Total to Average Average Turnover (in
Balanced Period Return Net Assets Net Assets Rate thousands)
May 1, 1991
(inception) through
Dec. 31, 1991 $6.19 38.02%* 1.00%* 2.36%* 42%* $ 1,412
Year Ended
Dec. 31, 1992 5.74 (6.04%) 1.00% 1.91% 85% 34,382
Year Ended
Dec. 31, 1993 6.07 7.68% 1.00% 1.97% 68% 75,924
Year Ended
Dec. 31, 1994 5.96 .61% 1.00% 2.49% 63% 105,100
Year Ended
Dec. 31, 1995 -- --% --% -- -- --
*Annualized
</TABLE>
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED BY TCI PORTFOLIOS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER
INFORMATION OR REPRESENTATION.
3
<PAGE>
INFORMATION REGARDING THE FUND
- --------------------------------------------------------------------------------
INVESTMENT POLICIES OF THE FUND
TCI Portfolios has adopted certain investment restrictions applicable to
the fund that are set forth in the statement of additional information. Those
restrictions, as well as the investment objective of the fund, as identified
on the front cover page, and any other investment policies designated as
"fundamental" in this prospectus or in the statement of additional
information, cannot be changed without the approval of the shareholders
entitled to cast a majority of the outstanding votes of the corporation, as
defined by the Investment Company Act. The fund has implemented additional
investment policies and practices to guide its activities in the pursuit of
its investment objective. These policies and practices, which are described
throughout this prospectus, are not designated as fundamental policies and
may be changed without shareholder approval.
The investment objective of TCI Balanced is capital growth and current
income. The fund will seek to achieve its objective, with regard to the
equity portion of its portfolio, by investing in common stocks (including
securities convertible into common stocks and other equity equivalents) and
other securities that meet certain fundamental and technical standards of
selection and have, in the opinion of the fund's investment manager,
better-than-average potential for appreciation. Management of the fund
intends to maintain approximately 60% of the fund's assets in such
securities, regardless of the movement of stock prices generally.
The equity portion of the fund may be invested in cash and cash
equivalents temporarily or when the fund is unable to find equity securities
meeting its criteria of selection. It may only purchase securities of
companies that have a record of at least three years' continuous operation.
Since a portion of the fund's portfolio will be invested in fixed income
securities, the opportunity for capital appreciation may be expected to be
less than with a fund that invests primarily in common stocks.
Management intends to maintain approximately 40% of the fund's assets in
fixed income securities, with a minimum of 25% of that amount in fixed income
senior securities. The fixed income securities in the fund will be chosen
based on their level of income production and price stability. The fund may
invest in a diversified portfolio of debt and other fixed-rate securities
payable in U.S. currency. These may include obligations of the U.S.
government, its agencies and instrumentalities, corporate securities (bonds,
notes, preferred and convertible issues), and sovereign government,
municipal, mortgage-related and other asset-backed securities.
With regard to obligations of the U.S. government, its agencies and
instrumentalities, TCI Balanced may invest in (1) direct obligations of the
United States, such as Treasury bills, Treasury notes and U.S. government
bonds, which are supported by the full faith and credit of the United States,
and (2) obligations, including mortgage-related securities, issued or
guaranteed by agencies and instrumentalities of the U.S. government that are
established under an Act of Congress. These agencies and instrumentalities
may include, but are not limited to, the Government National Mortgage
Association, Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, Student Loan Marketing Association, Federal Farm Credit
Banks, Federal Home Loan Banks and Resolution Funding Corporation. The
securities of some of these agencies and instrumentalities, such as the
Government National Mortgage Association, are guaranteed as to principal and
interest by the United States Treasury, and other securities are supported by
the right of the issuer, such as the Federal Home Loan Banks, to borrow from
the Treasury. Other obligations, including those issued by the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation,
are supported only by the credit of the instrumentality.
Mortgage-related securities in which TCI Balanced may invest include
collateralized
4
<PAGE>
mortgage obligations ("CMOs") issued by a U.S. agency or instrumentality. A
CMO is a debt security that is collateralized by a portfolio or pool of
mortgages or mortgage-backed securities. The issuer's obligation to make
interest and principal payments is secured by the underlying pool or
portfolio of mortgages or securities.
The market value of mortgage-related securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of
principal and interest by the U.S. government, is not insured. When interest
rates rise, the market value of those securities may decrease in the same
manner as other fixed-rate debt, but when interest rates decline, their
market value may not increase as much as other fixed-rate debt instruments
because of the prepayment feature inherent in the mortgages underlying such
securities. If such securities are purchased at a premium, the fund will
suffer a loss if the obligation is prepaid. Prepayments will be reinvested at
prevailing rates, which may be less than the rate paid on such obligation.
For the purpose of determining the weighted average portfolio maturity
of the fund, management shall consider the maturity of a security issued by
the Government National Mortgage Association, or other mortgage-related
security, to be the remaining expected average life of the security. The
average life of such securities is likely to be substantially less than the
original maturity as a result of prepayments of principal of the mortgages
underlying such securities, especially in a declining interest rate
environment.
It is management's objective to invest the fund's fixed income holdings
in high-grade securities. At least 80% of fixed income assets will be
invested in securities that at the time of purchase are rated within the
three highest categories by a nationally recognized statistical rating
organization (at least A by Moody's Investor Services, Inc.
("Moody's") or Standard & Poor's Corp. ("S&P")).
The remaining portion of the fixed income assets may be invested in
issues that are either rated in the fourth highest category (Baa by Moody's
or BBB by S&P) or, if not rated, that are of equivalent investment quality as
determined by the investment manager and that, in the opinion of the
investment manager, can contribute meaningfully to the fund's results without
compromising its objectives. Such issues might include a lower-rated issue
where research suggests the likelihood of a rating increase or a convertible
issue of a company deemed attractive by the equity management team. For a
brief discussion of fixed income investing, see "Fundamentals of Fixed Income
Investing" on page 6.
There are no maturity restrictions on the securities in which the fund
may invest. Under normal market conditions the weighted average portfolio
maturity will be in the three- to 10-year range. The management will actively
manage the portfolio, adjusting the weighted average portfolio maturity in
response to expected interest rates. During periods of rising interest rates
a shorter weighted average maturity may be adopted in order to reduce the
effect of bond price declines on the fund's net asset value. When interest
rates are falling and bond prices rising, a longer weighted average portfolio
maturity may be adopted.
SHAREHOLDERS OF TCI PORTFOLIOS
TCI Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although TCI Portfolios does not foresee any disadvantages to contract owners
due to the fact that it offers its shares as an investment medium for both
variable annuity and variable life products, the interests of various
contract owners participating in the funds of TCI Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, TCI Portfolios' board of
directors will monitor events in order to identify any material
irreconcilable conflicts that may possibly arise and to determine what
action, if any, should be taken in
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response to such conflicts. If a conflict were to occur, an insurance
company separate account might be required to withdraw its investments in
the funds of TCI Portfolios and those funds might be forced to sell
securities at disadvantageous prices to fund such withdrawal.
OTHER INVESTMENT POLICIES
For additional information regarding the fund and its investment
policies, see "Investment Restrictions Applicable to all Series of Shares" in
the statement of additional information.
FUNDAMENTALS OF FIXED
INCOME INVESTING
Over time, the level of interest rates available in the marketplace
changes. As prevailing rates fall, the prices of fixed income securities,
i.e., securities that trade on a yield basis, rise. On the other hand, when
prevailing interest rates rise, the prices of such securities fall.
Generally, the longer the maturity of a debt security, the higher its
yield and the greater its price volatility. Conversely, the shorter the
maturity, the lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on
fixed income security portfolios. A change in the level of interest rates
causes the net asset value per share of any fixed income security fund,
except money market funds, to change. If sustained over time, it would also
have the impact of raising or lowering the yield of that fund.
In addition to the risk arising from fluctuating interest rate levels,
debt securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond
ratings take into account the relative likelihood that such timely payment
will occur. As a result, lower-rated bonds sell at higher yield levels than
top-rated bonds of similar maturity. In addition, as economic, political and
business developments unfold, lower-quality bonds, which possess lower levels
of protection with regard to timely payment, usually exhibit more price
fluctuation than do higher-quality bonds of maturity.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise
committed to the purchase of securities pursuant to the investment policy of
the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered as a loan collateralized
by the security purchased. The fund's risk is the ability of the seller to
pay the agreed-upon repurchase price on the repurchase date. If the seller
defaults, the fund may incur costs in disposing of the collateral, which
would reduce the amount realized thereon. If the seller seeks relief under
the bankruptcy laws, the disposition of the collateral may be delayed or
limited. To the extent the value of the security decreases, the fund could
experience a loss.
The fund will limit repurchase agreement transactions to transactions
with those commercial banks and broker-dealers whose creditworthiness has
been reviewed and found satisfactory by the Fund's management pursuant to
criteria adopted by the fund's board of directors.
PORTFOLIO LENDING
In order to realize additional income, the
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fund may lend its portfolio securities to persons not affiliated with it and
who are deemed to be creditworthy. Such loans must be secured continuously by
cash collateral maintained on a current basis in an amount at least equal to
the market value of the securities loaned or by irrevocable letters of
credit. During the existence of the loan, the fund must continue to receive
the equivalent of the interest and dividends paid by the issuer on the
securities loaned and interest on the investment of the collateral. The fund
must have the right to call the loan and obtain the securities loaned at any
time on five days' notice, including the right to call the loan to enable the
fund to vote the securities. Interest and dividends on loaned securities may
not exceed 10% of the annual gross income of the fund (without offset for
realized capital gains). The portfolio lending policy described in this
paragraph is a fundamental policy that may be changed only by a vote of a
majority of the shareholders of TCI Portfolios.
TCI Portfolios is indemnified against loss on the loans by United States
Trust Company of New York.
FOREIGN SECURITIES
The fund may invest an unlimited amount of its assets in the securities
of foreign issuers when these securities meet its standards of selection. The
fund may make such investments either directly in foreign securities or
indirectly by purchasing depositary receipts or depositary shares or similar
instruments for foreign securities ("DRs"). DRs are securities that are
issued in and are listed on exchanges or quoted in over-the-counter markets
in one country but represent shares of issuers domiciled in another country.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future
political and economic developments, currency restrictions and devaluations,
securities clearance and settlement procedures, exchange control regulations,
reduced availability of public information concerning issuers, and the fact
that foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards or to other regulatory practices
and requirements comparable to those applicable to domestic issuers.
FORWARD CURRENCY
EXCHANGE CONTRACTS
Some of the securities held by the fund may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars
or the currency of the country where issued (if not U.S. dollars), but have a
value that is dependent upon the performance of a foreign security, as valued
in the currency of its home country. As a result, the value of its portfolio
will be affected by changes in the exchange rate between foreign currencies
and the U.S. dollar, as well as by changes in the market value of the
securities themselves. The performance of foreign currencies relative to the
dollar may be an important factor in the overall performance of the fund.
In order to protect against adverse movements in exchange rates between
currencies, the fund may, for hedging purposes only, enter into forward
currency exchange contracts. A forward currency exchange contract obligates
the fund to purchase or sell a specific currency at a future date at a
specific price.
The fund may elect to enter into a forward currency exchange contract
with respect to a specific purchase or sale of a security, or with respect to
the fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to
the specific purchase or sale of a security denominated in a foreign
currency, the fund can "lock in" an exchange rate between the trade and
settlement dates for that purchase or sale. This practice is sometimes
referred to as "transaction hedging." The fund may enter into transaction
hedging contracts with respect to all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in
value compared to the U.S. dollar, the fund may enter into a foreign cur-
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rency exchange contract to sell an amount of foreign currency equal to the
value of some or all of the fund's portfolio securities either denominated
in, or whose value is tied to, that currency. This practice is sometimes
referred to as "portfolio hedging." The fund may not enter into a portfolio
hedging transaction where the fund would be obligated to deliver an amount of
foreign currency in excess of the aggregate value of the fund's portfolio
securities or other assets denominated in, or whose value is tied to, that
currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the investment manager. However, it is anticipated that the
fund will enter into portfolio hedges much less frequently than transaction
hedges.
If the fund enters into a forward contract, the fund, when required,
will instruct its custodian bank to segregate cash or liquid high-grade
securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily,
and if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than
the amount of the fund's commitment. At any given time, no more than 10% of
the fund's assets will be committed to a segregated account in connection
with portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult,
and there is no assurance that any attempt to protect the fund against
adverse currency movements through the use of forward currency exchange
contracts will be successful. In addition, the use of forward currency
exchange contracts may limit the potential gains that might result from a
positive change in the relationship between the foreign currency and the U.S.
dollar.
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. Certain derivative securities are more accurately
described as "index/structured securities." Index/structured securities are
derivative securities whose value or performance is linked to other equity
securities (such as DRs), currencies, interest rates, indexes or other
financial indicators ("reference indexes"). No fund may invest in an
index/structured security unless the reference index or the instrument to
which it relates is an eligible investment for the fund. For example, a bond
whose interest rate was indexed to the return on two-year treasury securities
would be a permissible investment (assuming it met the other requirements for
the fund), while a bond whose return was indexed to the price of oil would
not be a permissible investment.
The return, interest rate or, unlike most fixed income securities, the
principal amount payable at maturity of an index/structured security may
increase or decrease, depending upon changes in the reference index. Index/
structured securities may be positively or negatively indexed. That means
that an increase in the reference index may produce an increase or decrease
in the return, interest rate or value at maturity of the security.
No purchases will be made of index/structured securities having
"leverage" characteristics. This means that no investments will be made in
securities whose change in return, interest rate or value at maturity is a
multiple of the change in the reference index.
Because their performance is tied to a reference index, a fund investing
in index/structured securities, in addition to being exposed to the credit
risk of the issuer of the security, will also bear the market risk of changes
in the reference index.
The board of directors has approved management'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. Management will report on fund
activity in derivative securities to the board of directors as necessary. In
addition, the board will review man-
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agement's policy for investments in derivative securities annually.
SHORT SALES
The fund may engage in short sales if, at the time of the short sale,
the fund owns or has the right to acquire an equal amount of the security
being sold short at no additional cost.
The fund may make a short sale when it wants to sell the security it
owns at a current attractive price but also wishes to defer recognition of
gain or loss for federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the investment
manager, such purchases will further the investment objectives of the fund.
The price of when-issued securities is established at the time the commitment
to purchase is made. Delivery of and payment for these securities typically
occur 15 to 45 days after the commitment to purchase. Market rates of
interest on debt securities at the time of delivery may be higher or lower
than those contracted for on the when-issued security. Accordingly, the value
of such security may decline prior to delivery, which could result in a loss
to the fund. A separate account consisting of cash or high-quality liquid
debt securities in an amount at least equal to the when-issued commitments
will be established and maintained with the custodian. No income will accrue
to the fund prior to delivery.
RULE 144A SECURITIES
The fund may invest up to 15% of its assets in illiquid securities
(securities that may not be sold within seven days at approximately the price
used in determining the net asset value of fund shares), including restricted
securities. Although securities which may be resold only to qualified
institutional buyers in accordance with the provisions of Rule 144A under the
Securities Act of 1933 are considered "restricted securities," the fund may
purchase Rule 144A securities without regard to the percentage limitations
described above when Rule 144A securities present an attractive investment
opportunity, otherwise meet the fund's criteria of selection, and also meet
the liquidity guidelines established for Rule 144A securities.
With respect to securities eligible for resale under Rule 144A, the
staff of the Securities and Exchange Commission has taken the position that
the liquidity of such securities in the portfolio of a fund offering
redeemable securities is a question of fact for the board of directors to
determine, such determination to be based upon a consideration of the readily
available trading markets and the review of any contractual restrictions.
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 TCI
Portfolios has delegated the day-to-day function of determining the liquidity
of 144A securities to the investment manager. The board retains the
responsibility to monitor the implementation of the guidelines and procedures
it has adopted.
Since the secondary market for such securities will be limited to
certain qualified institutional investors, their liquidity may be limited
accordingly and the fund may from time to time hold a Rule 144A security that
is illiquid. In such an event, TCI Portfolios will consider appropriate
remedies to minimize the effect on the fund's liquidity.
PERFORMANCE ADVERTISING
From time to time, TCI Portfolios (or the insurance companies that use
TCI Portfolios to fund the benefits of variable annuity or variable life
insurance contracts) may advertise performance data. Fund performance may be
shown by
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presenting one or more performance measurements, including cumulative total
return, average annual total return, yield and effective yield.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compounded return over a stated period of time that
would have produced the fund's cumulative total return over the same period
if the fund's performance had remained constant throughout.
A quotation of yield reflects the fund's income over a stated period
expressed as a percentage of the fund's share price. Yield is calculated by
adding over a 30-day (or one-month) period all interest and dividend income
(net of fund expenses) calculated on each day's market values, dividing this
sum by the average number of fund shares outstanding during the period, and
expressing the result as a percentage of the fund's share price on the last
day of the 30-day (or one-month) period. The percentage is then annualized.
Capital gains and losses are not included in the calculation. Yields are
calculated according to accounting methods that are standardized in
accordance with Securities and Exchange Commission rules for all stock and
bond funds. Because yield accounting methods differ from the methods used for
other accounting purposes, TCI Balanced's yield may not equal income paid on
your shares or the income reported in the fund's financial statements.
TCI Portfolios may also include in advertisements data comparing
performance with the performance of non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations (such as Lipper Analytical Services or Donoghue's Money Fund
Report) and publications that monitor the performance of mutual funds.
Performance information may be quoted numerically or may be represented in a
table, graph or other illustration. In addition, fund performance may be
compared to well-known indices of market performance, including the S&P 500
Index, The Dow Jones Industrial Average, Donoghue's Money Fund Average, the
Shearson Lehman Intermediate Government Bond Index, the constant maturity
five-year U.S.Treasury Note Index and the Bank Rate Monitor National Index of
21/2 -year CD rates. Fund performance may also be compared to other funds in
the Twentieth Century family. It may also be combined or blended with other
funds in the Twentieth Century family, and that combined or blended
performance may be compared to the same indices to which the individual funds
may be compared.
All performance information advertised by TCI Portfolios 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.
PERFORMANCE FIGURES ADVERTISED BY TCI PORTFOLIOS SHOULD NOT BE USED FOR
COMPARA-TIVE PURPOSES BECAUSE THESE FIGURES WILL NOT INCLUDE CHARGES AND
DEDUCTIONS IMPOSED BY THE INSURANCE COMPANY SEPARATE ACCOUNT UNDER THE
VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS.
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ADDITIONAL INFORMATION YOU SHOULD KNOW
- --------------------------------------------------------------------------------
SHARE PRICE
PURCHASE AND
REDEMPTION OF SHARES
For instructions on how to purchase and redeem shares, read the
prospectus of your insurance company's separate account.
Shares of TCI Portfolios are sold and redeemed by TCI Portfolios at
their net asset value next determined after receipt by the insurance company
separate account of the order from the variable annuity or variable life
insurance contract owner to purchase or to redeem. There are no sales
commissions or redemption charges. However, certain sales or deferred sales
charges and other charges may apply to the variable annuity or life insurance
contracts. Those charges are disclosed in the separate account prospectus.
WHEN SHARE PRICE IS DETERMINED
The price of TCI Portfolios' shares is their net asset value. Net asset
value is determined at the close of business of the New York Stock Exchange,
usually 3 p.m. Central time, on each day that the Exchange is open. Requests
to redeem shares and investments received by the separate account before the
close of business of the Exchange are effective, and will receive the price
determined, on the day received. Redemption requests and investments received
thereafter are effective on, and receive the price determined as of, the
close of the Exchange the next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be
summarized as follows:
The portfolio securities of the fund, except as otherwise noted, listed
or traded on a stock exchange are valued at the latest sale price on the
exchange where they are primarily traded. If no sale is reported, the mean of
the latest bid and asked prices is used. Securities traded over the counter
are required by regulations of the Securities and Exchange Commission. When
market quotations are not readily available, securities and other assets are
valued at fair
value as determined in good faith 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.
Pursuant to a determination by the TCI Portfolios' board of directors
that such value represents fair value, debt securities with maturities of 60
days or less are valued at amortized cost. When a security is valued at
amortized cost, it is valued at its cost when purchased, and thereafter by
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument.
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 of the New York Stock Exchange,
if that is earlier. That value is then converted to U.S. 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 which was likely to
materially change the net asset value, then that security would be valued at
fair value as determined by the board of directors. Trading of securities in
foreign markets may not take place on every New York Stock Exchange business
day. In addition, trading may take place in various
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foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which the fund's net asset value is not
calculated. Therefore, such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio securities used
in such calculation and the value of the fund's portfolio may be affected on
days when shares of the fund may not be purchased or redeemed.
DISTRIBUTIONS
Distributions from net investment income generally are declared and paid
quarterly in March, June, September and December, while distributions from
realized securities gains, if any, generally are declared and paid once a
year. The fund may make distributions on a more frequent basis to comply with
the distribution requirements of the Internal Revenue code, in all events in
a manner consistent with the provisions of the Investment Company Act. All
distributions from the fund will be reinvested in additional shares.
The board of directors may elect not to distribute capital gains in
whole or in part to take advantage of loss carryovers.
TAXES
TCI Portfolios intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. For a discussion of the tax
status of your variable contract, refer to the prospectus of your insurance
company's separate account.
MANAGEMENT
Under the laws of the State of Maryland, the board of directors is
responsible for managing the business and affairs of TCI Portfolios. Acting
pursuant to an investment advisory agreement entered into with TCI
Portfolios, Investors Research Corporation ("Investors Research") serves as
the investment manager of TCI Portfolios. Its principal place of business is
Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
Investors Research has been providing investment advisory services to
investment companies and institutional investors since 1958. Certain
investments may be appropriate for TCI Portfolios and also for other clients
advised by Investors Research. Investment decisions are made with the
intention of achieving the respective investment objectives of Investors
Research's clients 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 in different amounts and at different times for more than one
but less than all clients. In addition, purchases or sales of the same
security may be made for two or more clients on the same date. Such
transactions will be allocated among clients in a manner believed by
Investors Research 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 TCI Portfolios.
Investors Research supervises and manages the investment portfolio of
the fund and directs the purchase and sale of its investment securities.
Investors Research utilizes a team of portfolio managers, assistant portfolio
managers and analysts acting together to manage the assets of the fund. The
team meets regularly to review portfolio holdings and to discuss purchase and
sale activity. The team adjusts holdings in the fund's portfolio as they deem
appropriate in pursuit of the fund's investment objectives. Individual
portfolio manager members of the team may also adjust portfolio holdings of
the funds as necessary between team meetings.
The portfolio manager members of the TCI Balanced team and their
principal business experience for the last five years are as follows:
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ROBERT C. PUFF, JR., executive vice president and chief investment
officer, has been a portfolio manager since joining Investors Research in
1983. In his position as chief investment officer, Mr. Puff oversees the
investment activities of all of the teams that manage TCI Portfolios funds.
CHARLES M. DUBOC, senior vice president and portfolio manager, joined
Investors Research in August 1985 and served as fixed income portfolio
manager from that time until April 1993. In April 1993, Mr. Duboc joined
Investor Research's equity investment efforts. He is a member of the team
that manages the equity portion of TCI Balanced.
NORMAN E. HOOPS, senior vice president and fixed income portfolio
manager, joined Investors Research as vice president and portfolio manager in
November 1989. In April 1993, he became senior vice president. He manages the
fixed income portion of TCI Balanced.
NANCY B. PRIAL, vice president and portfolio manager, joined Investors
Research in February 1994 as a portfolio manager. She is a member of the team
that manages the equity portion of TCI Balanced. For more than four years
prior to joining Investors Research, Ms. Prial served as senior vice
president and portfolio manager at Frontier Capital Management Company,
Boston, Massachusetts.
The activities of Investors Research are subject only to directions of
TCI Portfolios' board of directors. Investors Research pays all the expenses
of TCI Portfolios except brokerage, taxes, interest, fees and expenses of the
non-interested person directors (including counsel fees) and extraordinary
expenses.
For the foregoing services, Investors Research is paid a fee of 1% of
the average net assets of the fund during the year. The fee is paid and
computed on the first business day of each month by multiplying 1% of the
average daily closing net asset values of the shares of the fund during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
Many investment companies pay smaller investment management fees. However,
most if not all of such companies also pay, in addition to an investment
management fee, certain of their own expenses, while almost all of TCI
Portfolios' expenses, as noted above, are paid by Investors Research.
TCI Portfolios and Investors Research have adopted a Code of Ethics (the
"Code"), which restricts personal investing practices by employees of
Investors Research and its affiliates. Among other provisions, the Code
requires that employees with access to information about the purchase or sale
of securities in the fund's portfolios obtain preclearance before executing
personal trades. With respect to portfolio managers and other investment
personnel, the Code prohibits acquisition of securities in an initial public
offering, as well as profits derived from the purchase and sale of the same
security within 60 calendar days. These provisions are designed to ensure
that the interests of fund shareholders come before the interests of the
people who manage those funds.
Twentieth Century Services, Inc., 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend-paying agent of TCI
Portfolios. It provides facilities, equipment and personnel to TCI Portfolios
and is paid for such services by Investors Research. Certain administrative
and recordkeeping services that would otherwise be performed by Twentieth
Century Services, Inc. may be performed by the insurance company that
purchases TCI Portfolios' shares, and Investors Research may pay the
insurance company for such services.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman and
chief executive officer of TCI Portfolios, controls Twentieth Century
Companies, Inc. by virtue of his ownership of a majority of its common stock.
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FURTHER INFORMATION
ABOUT TCI PORTFOLIOS, INC.
TCI Portfolios was organized as a Maryland corporation on June 4, 1987.
It is a diversified, open-end management investment company. Its business and
affairs are managed by its officers under the direction of its board of
directors.
The principal office of TCI Portfolios is 4500 Main Street, P.O. Box
419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail
to that address or by phone to 816-531-5575.
TCI Portfolios issues five series of common stock with a par value of
$.01 per share. The assets belonging to each series of shares are held
separately by the custodian and, in effect, each series is a separate fund.
Each share of each series, when issued, is fully paid and non-assessable.
Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except
that certain matters must be voted on by the series of shares affected, and
matters affecting only one series are voted upon only by that series.
Shares have non-cumulative voting rights, which means that holders of
more than 50% of the net asset value of the shares voting for election of
directors can elect all of the directors if they choose to do so and, in such
event, the holders of the remaining minority will not be able to elect any
person or persons to the board of directors.
An insurance company issuing a variable contract invested in shares
issued by TCI Portfolios will request voting instructions from contract
holders and will vote shares in proportion to the voting instructions
received.
In the event of the complete liquidation or dissolution of TCI
Portfolios, shareholders of each series of shares shall be entitled to
receive, pro rata, all of the assets less the liabilities of that series.
TCI PORTFOLIOS RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES,
PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE
STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN
THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
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TCI PORTFOLIOS, INC.
TCI Balanced
Prospectus
April 1, 1996
[company logo]
TCI PORTFOLIOS, INC.
Part of the Twentieth Century
Family of Funds
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P.O. Box 419385
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Kansas City, Missouri
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64141-6385
1-800-345-3533 or 816-531-5575
[company logo]
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IN-BKT-4183
9601 Recycled
(C) 1996 Twentieth Century Services, Inc.
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TCI PORTFOLIOS, INC.
TCI International
Prospectus
APRIL 1,
1996
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TCI Portfolios, Inc. ("TCI Portfolios") is a mutual fund that offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. The fund currently offers five portfolios or
series. TCI International is described in this prospectus. The other series are
described in separate prospectuses. TCI International is sometimes hereinafter
referred to as the "fund." You should consult the prospectus of the separate
account of the specific insurance product that accompanies this prospectus to
see which series of TCI Portfolios are available for purchase for such insurance
product.
The investment objective of TCI International is capital growth. TCI
International will seek to achieve its investment objective by investing
primarily in an internationally diversified portfolio of common stocks that are
considered by management to have prospects for appreciation. The fund will
invest primarily in securities of issuers located in developed markets.
Investment in securities of foreign issuers typically involves a greater degree
of risk than investment in domestic securities. (See "Risk Factors," page 5.)
There can be no assurance that the fund will achieve its investment objective.
Shares of the fund may be purchased only by insurance companies for the
purpose of funding variable annuity or variable life insurance contracts. This
prospectus should be read in conjunction with the prospectus of the separate
account of the specific insurance product that accompanies this prospectus.
Additional information is included in the statement of additional
information dated April 1, 1996, and filed with the Securities and Exchange
Commission. It is incorporated in this prospectus by reference. To obtain a
copy, or to make any other inquiries, call or write:
TCI Portfolios, Inc.
4500 Main Street * P.O. Box 419385
Kansas City, Mo. 64141-6385 * 1-800-345-3533
Local and international calls: 816-531-5575
Telecommunications device for the deaf:
1-800-345-1833 * In Missouri: 816-753-0070
This prospectus gives you information about TCI Portfolios that you should
know before investing. Keep it for future reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Financial Highlights.....................................................3
INFORMATION REGARDING THE FUND
Investment Policies of the Fund..........................................4
Risk Factors.............................................................5
Shareholders of TCI Portfolios...........................................6
Other Investment Policies................................................6
Forward Currency Exchange Contracts...................................6
Derivative Securities.................................................7
Indirect Foreign Investment...........................................8
Sovereign Debt Obligations............................................8
Repurchase Agreements.................................................8
When-Issued Securities................................................8
Short Sales...........................................................8
Rule 144A Securities..................................................9
Performance Advertising..................................................9
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price.............................................................11
Purchase and Redemption of Shares....................................11
When Share Price is Determined.......................................11
How Share Price is Determined........................................11
Distributions...........................................................12
Taxes...................................................................12
Management..............................................................12
Further Information
About TCI Portfolios, Inc............................................13
2
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<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
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The Financial Highlights for each of the periods presented have been examined by Baird, Kurtz & Dobson, independent certified
public accountants, whose report appears in the corporation's annual report, which is incorporated by reference into the statement
of additional information. The annual report contains additional performance information and will be available upon request and
without charge.
INCOME FROM
INVESTMENT OPERATIONS DISTRIBUTIONS
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Net Realized
and Unrealized Distributions
Gains on from Net
Net Asset Investments Total Distributions Realized
Value, Net and Foreign from from Net Gains on
TCI Beginning Investment Currency Investment Investment Security Total
International of Period Income Transactions Operations Income Transactions Distributions
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1994
(inception)
through
December 31, 1994 $5.00 $(0.003)* $(0.25) $(0.25) -- -- --
Year Ended
Dec. 31, 1995 -- -- -- -- -- -- --
(table continued below)
RATIOS/SUPPLEMENTAL DATA
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(table continued) Ratio of Net Net
Ratio of Investment Assets,
Net Asset Operating Income End of
Value, Expenses to Portfolio Period
TCI End of Total to Average Average Turnover (in
International Period Return Net Assets Net Assets Rate thousands)
May 1, 1994
(inception)
through
December 31, 1994 $4.75 (5.00%) 1.50%** (0.11%)** 157% $17,993
Year Ended
Dec. 31, 1995 -- --% --% -- -- --
*Computed using average shares outstanding throughout the period.
**Annualized
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NO PERSON IS AUTHORIZED BY TCI PORTFOLIOS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER
INFORMATION OR REPRESENTATION.
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INFORMATION REGARDING THE FUND
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INVESTMENT POLICIES OF THE FUND
TCI Portfolios has adopted certain investment restrictions applicable to
the fund that are set forth in the statement of additional information. Those
restrictions, as well as the investment objective of the fund, as identified
on the front cover page, and any other investment policies designated as
"fundamental" in this prospectus or in the statement of additional
information, cannot be changed without the approval of the shareholders
entitled to cast a majority of the outstanding votes of the corporation, as
defined by the Investment Company Act. The fund has implemented additional
investment policies and practices to guide its activities in the pursuit of
its investment objective. These policies and practices, which are described
throughout this prospectus, are not designated as fundamental policies and
may be changed without shareholder approval.
The investment objective of TCI International is capital growth. The
fund will seek to achieve its investment objective by investing primarily in
securities of foreign companies that meet certain fundamental and technical
standards of selection and have, in the opinion of the investment manager,
potential for appreciation. The fund will invest primarily in common stocks
(defined to include depositary receipts for common stocks and other equity
equivalents) of such companies. TCI Portfolios tries to stay fully invested
in such securities, regardless of the movement of stock prices generally.
Although the primary investment of the fund will be common stocks, the
fund may also invest in other types of securities consistent with the
accomplishment of the fund's objectives. When the manager believes that the
total capital growth potential of other securities equals or exceeds the
potential return of common stocks, the fund may invest up to 35% of its
assets in such other securities.
The other securities the fund may invest in are convertible securities,
preferred stocks, bonds, notes and debt securities of companies, obligations
of domestic or foreign governments and their agencies. The fund will limit
its purchases of debt securities to investment-grade obligations. For
long-term debt obligations this includes securities that are rated Baa or
better by Moody's Investor Services, Inc. ("Moody's") or BBB or better by
Standard & Poor's corporation ("S&P"), or that are not rated but considered
by the manager to be of equivalent quality. According to Moody's, bonds rated
Baa are medium grade and possess some speculative characteristics. A BBB
rating by S&P indicates S&P's belief that a security exhibits a satisfactory
degree of safety and capacity for repayment but is more vulnerable to adverse
economic conditions or changing circumstances than higher-rated securities.
The fund may make foreign investments either directly in foreign
securities or indirectly by purchasing depositary receipts or depositary
shares or similar instruments for foreign securities ("DRs"). DRs are
securities that are listed on exchanges or quoted in the over-the-counter
markets in one country but represent shares of issuers domiciled in another
country.
Notwithstanding the fund's investment objective of capital growth, under
exceptional market or economic conditions, the fund may temporarily invest
all or a substantial portion of its assets in cash or investment-grade
short-term securities (denominated in U.S. dollars or foreign currencies). To
the extent the fund assumes a defensive position, it will not be pursuing its
investment objective of capital growth.
Under normal conditions, the fund will invest at least 65% of its assets
in common stocks or other equity equivalents of issuers from at least three
countries outside of the United States. While securities of U.S. issuers may
be included in the portfolio from time to time, it is the primary intent of
the manager to diversify investments across a broad range of foreign issuers.
Management defines "foreign issuer" as an issuer of securities that is
domiciled outside
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the United States and/or whose shares trade principally on an exchange or
other market outside the United States.
In order to achieve maximum investment flexibility, the fund has not
established geographic limits on asset distribution on either a
country-by-country or region-by-region basis. The investment manager expects
to invest both in issuers whose principal place of business is located in
countries with developed economies (such as Germany, the United Kingdom and
Japan) and in issuers whose principal place of business is located in
countries with less developed economies (such as Portugal, Malaysia and
Mexico).
The principal criterion for inclusion of a security in the fund's
portfolio is its ability to meet the fundamental and technical standards of
selection and, in the opinion of the fund's investment manager, to achieve
better-than-average appreciation. If, in the opinion of the fund's investment
manager, a particular security satisfies this principal criterion, the
security may be included in the fund's portfolio, regardless of the location
of the issuer or the percentage of the fund's investments in the issuer's
country or region.
At the same time, however, the investment manager recognizes that both
the selection of the fund's individual securities and the allocation of the
portfolio's assets across different countries and regions are important
factors in managing an international equity portfolio. For this reason, the
manager also will consider a number of other factors in making investment
selections including: the prospects for relative economic growth among
countries or regions, economic and political conditions, expected inflation
rates, currency exchange fluctuations and tax considerations.
RISK FACTORS
Investing in securities of foreign issuers generally involves greater
risks than investing in the securities of domestic companies. Potential
investors should carefully consider the following factors before investing:
Currency Risk. The value of the fund's foreign investments 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 the fund's 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 fund invests are not as developed as the economy of the United
States and may be subject to significantly different forces. Political or
social instability, expropriation or confiscatory taxation, and limitations
on the removal of funds or other assets, could also adversely affect the
value of investments. Investments in lesser developed countries will involve
exposure to economic structures that are generally less diverse and mature
than in the United States or other developed countries and to political
systems that can be expected to be less stable than those of more developed
countries. A developing country can be considered to be a country that is in
the initial stages of its industrialization cycle. Historically, markets of
developing countries have been more volatile than the markets of developed
countries. The fund has no limit with respect to investments in lesser
developed countries.
Regulatory Risk. Foreign companies are generally 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
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the fund may be reduced by a withholding tax at the source that would reduce
dividends paid by the fund.
Market and Trading Risk. Brokerage commission rates in foreign
countries, which are generally 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 fund invests 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 is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers, which may
make it difficult to enforce contractual obligations. In addition, extended
clearance and settlement periods in some foreign markets could result in
losses to the fund or cause the fund to miss attractive investment
possibilities.
SHAREHOLDERS OF TCI PORTFOLIOS
TCI Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although TCI Portfolios does not foresee any disadvantages to contract owners
due to the fact that it offers its shares as an investment medium for both
variable annuity and variable life products, the interests of various
contract owners participating in the funds of TCI Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, TCI Portfolios' board of
directors will monitor events in order to identify any material
irreconcilable conflicts that may possibly arise, and to determine what
action, if any, should be taken in response to such conflicts. If a conflict
were to occur, an insurance company separate account might be required to
withdraw its investments in the fund and the fund might be forced to sell
securities at disadvantageous prices to fund such withdrawal.
OTHER INVESTMENT POLICIES
For additional information regarding the fund and its investment
policies, see "Investment Restrictions Applicable to all Series of Shares" in
the statement of additional information.
FORWARD CURRENCY
EXCHANGE CONTRACTS
Some of the securities held by the fund will be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars
or the currency of the country where issued (if not U.S. dollars) but have a
value that is dependent upon the performance of a foreign security, as valued
in the currency of its home country. As a result, the value of its portfolio
will be affected by changes in the exchange rate between foreign currencies
and the U.S. dollar as well as by changes in the market value of the
securities themselves. The performance of foreign currencies relative to the
dollar may be an important factor in the overall performance of the fund.
In order to protect against adverse movements in exchange rates between
currencies, the fund may, for hedging purposes only, enter into forward
currency exchange contracts. A forward currency exchange contract obligates
the fund to purchase or sell a specific currency at a future date at a
specific price.
The fund may elect to enter into a forward currency exchange contract
with respect to a specific purchase or sale of a security, or with respect to
the fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to
the specific purchase or sale of a security denominated in a foreign
currency, the fund can "lock in" an exchange rate between the trade and
settlement dates for that
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purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect
to all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in
value compared to the U.S. dollar, the fund may enter into a foreign currency
exchange contract to sell an amount of foreign currency equal to the value of
some or all of the fund's portfolio securities either denominated in, or
whose value is tied to, that currency. This practice is sometimes referred to
as "portfolio hedging." The fund may not enter into a portfolio hedging
transaction where the fund would be obligated to deliver an amount of foreign
currency in excess of the aggregate value of the fund's portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the investment manager. However, it is anticipated that the
fund will enter into portfolio hedges much less frequently than transaction
hedges.
If the fund enters into a forward contract, the fund, when required,
will instruct its custodian bank to segregate cash or liquid high-grade
securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily,
and if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than
the amount of the fund's commitment. At any given time, no more than 15% of
the fund's assets will be committed to a segregated account in connection
with portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult,
and there is no assurance that any attempt to protect the fund against
adverse currency movements through the use of forward currency exchange
contracts will be successful. In addition, the use of forward currency
exchange contracts may limit the potential gains that might result from a
positive change in the relationship between the foreign currency and the U.S.
dollar.
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. Certain derivative securities are more accurately
described as "index/ structured securities." Index/structured securities are
derivative securities whose value or performance is linked to other equity
securities (such as DRs), currencies, interest rates, indexes or other
financial indicators ("reference indexes"). No fund may invest in an
index/structured security unless the reference index or the instrument to
which it relates is an eligible investment for the fund.
The return, interest rate, or, unlike most fixed income securities, the
principal amount payable at maturity of an index/structured security may
increase or decrease, depending upon changes in the reference index. Index/
structured securities may be positively or negatively indexed. That means
that an increase in the reference index may produce an increase or decrease
in the return, interest rate or value at maturity of the security.
No purchases will be made of index/structured securities having
"leverage" characteristics. This means that no investments will be made in
securities whose change in return, interest rate or value at maturity is a
multiple of the change in the reference index.
Because their performance is tied to a reference index, a fund investing
in index/structured securities, in addition to being exposed to the credit
risk of the issuer of the security, will also bear the market risk of changes
in the reference index.
The board of directors has approved management'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. Management will report on fund
activity in
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derivative securities to the board of directors as necessary. In addition,
the board will review management's policy for investments in derivative
securities annually.
INDIRECT FOREIGN INVESTMENT
Subject to certain restrictions contained in the Investment Company Act,
the fund may invest in certain foreign countries indirectly through
investment fund and registered investment companies authorized to invest in
those countries. If the fund invests in investment companies, the fund will
bear its proportionate shares of the costs incurred by such companies,
including investment advisory fees, if any.
SOVEREIGN DEBT OBLIGATIONS
The fund may purchase sovereign debt instruments issued or guaranteed by
foreign governments or their agencies. Sovereign debt may be in the form of
conventional securities or other types of debt instruments such as loans or
loan participations.
REPURCHASE AGREEMENTS
The fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise
committed to the purchase of securities pursuant to the investment policy of
the fund.
A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.
Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered as a loan collateralized
by the security purchased. The fund's risk is the ability of the seller to
pay the agreed-upon repurchase price on the repurchase date. If the seller
defaults, the fund may incur costs in disposing of the collateral, which
would reduce the amount realized thereon. If the seller seeks relief under
the bankruptcy laws, the disposition of the collateral may be delayed or
limited. To the extent the value of the security decreases, the fund could
experience a loss.
The fund will limit repurchase agreement transactions to transactions
with those commercial banks and broker-dealers whose creditworthiness has
been reviewed and found satisfactory by the fund's management pursuant to
criteria adopted by the fund's board of directors.
The fund will not invest more than 15% of its assets in repurchase
agreements maturing in more than seven days.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the investment
manager, such purchases will further the investment objectives of the fund.
The price of when-issued securities is established at the time the commitment
to purchase is made. Delivery of and payment for these securities typically
occur 15 to 45 days after the commitment to purchase. Market rates of
interest on debt securities at the time of delivery may be higher or lower
than those contracted for on the when-issued security. Accordingly, the value
of such security may decline prior to delivery, which could result in a loss
to the fund. A separate account consisting of cash or high-quality liquid
debt securities in an amount at least equal to the when-issued commitments
will be established and maintained with the custodian. No income will accrue
to the fund prior to delivery.
SHORT SALES
The fund may engage in short sales if, at the time of the short sale,
the fund owns or has the
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right to acquire an equal amount of the security being sold short at no
additional cost. These transactions allow a fund to hedge against price
fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
A fund may make a short sale when it wants to sell the security it owns
at a current attractive price, but also wishes to defer recognition of gain
or loss for federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code.
RULE 144A SECURITIES
The fund may invest up to 15% of its assets in illiquid securities
(securities that may not be sold within seven days at approximately the price
used in determining the net asset value of fund shares), including restricted
securities. Although securities that may be resold only to qualified
institutional buyers in accordance with the provisions of Rule 144A under the
Securities Act of 1933 are considered "restricted securities," the fund may
purchase Rule 144A securities without regard to the percentage limitations
described above when Rule 144A securities present an attractive investment
opportunity, otherwise meet the fund's criteria of selection, and also meet
the liquidity guidelines established for Rule 144A securities.
With respect to securities eligible for resale under Rule 144A, the
staff of the Securities and Exchange Commission has taken the position that
the liquidity of such securities in the portfolio of a fund offering
redeemable securities is a question of fact for the board of directors to
determine, such determination to be based upon a consideration of the readily
available trading markets and the review of any contractual restrictions.
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 TCI
Portfolios has delegated the day-to-day function of determining the liquidity
of 144A securities to the investment manager. The board retains the
responsibility to monitor the implementation of the guidelines and procedures
it has adopted.
Since the secondary market for such securities will be limited to
certain qualified institutional investors, their liquidity may be limited
accordingly and the fund may from time to time hold a Rule 144A security that
is illiquid. In such an event, TCI Portfolios will consider appropriate
remedies to minimize the effect on the fund's liquidity.
PERFORMANCE ADVERTISING
From time to time TCI Portfolios (or the insurance companies that use
TCI Portfolios to fund the benefits of variable annuity or variable life
insurance contracts) may advertise performance data. Fund performance may be
shown by presenting one or more performance measurements, including
cumulative total return and average annual total return.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compounded return over a stated period of time that
would have produced the fund's cumulative total return over the same period
if the fund's performance had remained constant throughout.
TCI Portfolios may also include in advertisements data comparing
performance with the performance of non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations (such as Lipper Analytical Services or Donoghue's Money Fund
Report) and publications that monitor the performance of mutual funds.
Performance information may be quoted numerically or may be represented in a
table, graph or other illustration. In addition, fund performance may be
compared to well-known indices of market performance, including the S&P 500
Index, the Dow Jones
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Industrial Average, the Dow Jones World Index and the Morgan Stanley Capital
International Europe, Australia, Far East (EAFE) Index. Fund performance may
also be compared to other funds in the Twentieth Century family. It may also
be combined or blended with other funds in the Twentieth Century family, and
that combined or blended performance may be compared to the same indices to
which the individual funds may be compared.
All performance information advertised by the TCI Portfolios 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.
PERFORMANCE FIGURES ADVERTISED BY TCI PORTFOLIOS SHOULD NOT BE USED FOR
COMPARATIVE PURPOSES BECAUSE THESE FIGURES WILL NOT INCLUDE CHARGES AND
DEDUCTIONS IMPOSED BY THE INSURANCE COMPANY SEPARATE ACCOUNT UNDER THE
VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS.
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ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
PURCHASE AND
REDEMPTION OF SHARES
For instructions on how to purchase and redeem shares, read the
prospectus of your insurance company's separate account.
Shares of TCI Portfolios are sold and redeemed by TCI Portfolios at
their net asset value next determined after receipt by the insurance company
separate account of the order from the variable annuity or variable life
insurance contract owner to purchase or to redeem. There are no sales
commissions or redemption charges. However, certain sales or deferred sales
charges and other charges may apply to the variable annuity or life insurance
contracts. Those charges are disclosed in the separate account prospectus.
WHEN SHARE PRICE IS DETERMINED
The price of TCI Portfolios' shares is their net asset value. Net asset
value is determined at the close of business of the New York Stock Exchange,
usually 3 p.m. Central time, on each day that the Exchange is open. Requests
to redeem shares and investments received by the separate account before the
close of business of the Exchange are effective on, and will receive the
price determined, the day received. Redemption requests and investments
received thereafter are effective on, and receive the price determined, as of
the close of the Exchange the next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be
summarized as follows:
The portfolio securities of the fund, except as otherwise noted, listed
or traded on a stock exchange are valued at the latest sale price on the
exchange where they are primarily traded. Portfolio securities primarily
traded on foreign securities exchanges are generally valued at the preceding
closing value of such security 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 price is used. Depending on local convention or
regulation, securities traded over the counter are priced at the mean of the
latest bid and asked price, 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 good faith 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.
Pursuant to a determination by TCI Portfolios' board of directors that
such value represents fair value, debt securities with maturities of 60 days
or less are valued at amortized cost. When a security is valued at amortized
cost, it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which
it is traded or as of the close of business on the New York Stock Exchange,
if that is earlier. That value is then converted to U.S. 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
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would be valued at fair value as determined by the board of directors.
Trading of securities in foreign markets may not take place on every New York
Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of the fund's portfolio may be significantly
affected on days when shares of the fund may not be purchased or redeemed.
DISTRIBUTIONS
Distributions from net investment income and realized securities gains,
if any, generally are declared and paid once a year, but the fund may make
distributions on a more frequent basis to comply with the distributions
requirements of the Internal Revenue Code, in all events in a manner
consistent with the provisions of the Investment Company Act.
All distributions from the fund will be reinvested in additional shares.
The board of directors may elect not to distribute capital gains in
whole or in part to take advantage of loss carryovers.
TAXES
TCI Portfolios intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. For a discussion of the tax
status of your variable contract, refer to the prospectus of your insurance
company's separate account.
MANAGEMENT
Under the laws of the State of Maryland, the board of directors is
responsible for managing the business and affairs of TCI Portfolios. Acting
pursuant to an investment advisory agreement entered into with TCI
Portfolios, Investors Research Corporation ("Investors Research") serves as
the investment manager of TCI Portfolios. Its principal place of business is
Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
Investors Research has been providing investment advisory services to
investment companies and institutional investors since 1958. Certain
investments may be appropriate for TCI Portfolios and also for other clients
advised by Investors Research. Investment decisions are made with the
intention of achieving the respective investment objectives of Investors
Research's clients 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 in different amounts and at different times for more than one
but less than all clients. In addition, purchases or sales of the same
security may be made for two or more clients on the same date. Such
transactions will be allocated among clients in a manner believed by
Investors Research 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 TCI Portfolios.
Investors Research supervises and manages the investment portfolio of
the fund and directs the purchase and sale of its investment securities.
Investors Research utilizes a team of portfolio managers, assistant portfolio
managers and analysts acting together to manage the assets of the fund. The
team meets regularly to review portfolio holdings and to discuss purchase and
sale activity. The team adjusts holdings in the fund's portfolio as they deem
appropriate in pursuit of the fund's investment objectives. Individual
portfolio manager members of the team may also adjust portfolio holdings of
the fund as necessary between team meetings.
The portfolio manager members of the TCI International team and their
principal business
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experience during the past five years are as follows:
ROBERT C. PUFF, JR., executive vice president and chief investment
officer, has been a portfolio manager since joining Investors Research in
1983. In his position as chief investment officer, Mr. Puff oversees the
investment activities of all of the teams that manage TCI Portfolios funds.
THEODORE J. TYSON, vice president and portfolio manager, joined
Investors Research in 1988 and has been a portfolio manager member of the TCI
International team since its inception in 1994.
HENRIK STRABO, vice president and portfolio manager, joined Investors
Research in 1993 as a financial analyst and has been a portfolio manager
member of the TCI International team since its inception in 1994. Prior to
joining Investors Research, Mr. Strabo was vice president, international
equity sales with Barclays de Zoete Wedd (1991-1993) and obtained
international equity sales experience with Cresvale International
(1990-1991).
The activities of Investors Research are subject only to directions of
TCI Portfolios' board of directors. Investors Research pays all the expenses
of TCI Portfolios except brokerage, taxes, interest, fees and expenses of the
non-interested person directors (including counsel fees) and extraordinary
expenses.
For the foregoing services, Investors Research is paid a fee of 1.5% of
the average net assets of the fund during the year. The fee is paid and
computed on the first business day of each month by multiplying 1.5% of the
average daily closing net asset values of the shares of the fund during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
The management fee paid by the fund to Investors Research is higher than
the fees paid by the various other TCI Portfolios funds because of the higher
costs and additional expenses associated with managing and operating a fund
owning a portfolio consisting primarily of foreign securities. The fee may
also be higher than the fee paid by many other international or foreign
investment companies. Many investment companies pay smaller investment
management fees. However, most if not all of such companies also pay, in
addition to an investment management fee, certain of their own expenses,
while almost all of TCI Portfolios' expenses, as noted above, are paid by
Investors Research.
TCI Portfolios and Investors Research have adopted a Code of Ethics (the
"Code"), which restricts personal investing practices by employees of
Investors Research and its affiliates. Among other provisions, the Code
requires that employees with access to information about the purchase or sale
of securities in the fund's portfolios obtain preclearance before executing
personal trades. With respect to portfolio managers and other investment
personnel, the Code prohibits acquisition of securities in an initial public
offering, as well as profits derived from the purchase and sale of the same
security within 60 calendar days. These provisions are designed to ensure
that the interests of fund shareholders come before the interests of the
people who manage those funds.
Twentieth Century Services, Inc., 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend paying agent of TCI
Portfolios. It provides facilities, equipment and personnel to TCI
Portfolios, and is paid for such services by Investors Research. Certain
administrative and recordkeeping services that would otherwise be performed
by Twentieth Century Services, Inc., may be performed by the insurance
company that purchases TCI Portfolios' shares, and Investors Research may pay
the insurance company for such services.
Investors Research and Twentieth Century Services, Inc. are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman and
chief executive officer of TCI Portfolios, controls Twentieth Century
Companies, Inc. by virtue of his ownership of a majority of its common stock.
13
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FURTHER INFORMATION
ABOUT TCI PORTFOLIOS, INC.
TCI Portfolios was organized as a Maryland corporation on June 4, 1987.
It is a diversified, open-end management investment company. Its business and
affairs are managed by its officers under the direction of its board of
directors.
The principal office of TCI Portfolios is 4500 Main Street, P.O. Box
419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail
to that address, or by phone to 816-531-5575.
TCI Portfolios issues five series of common stock with a par value of
$.01 per share. The assets belonging to each series of shares are held
separately by the custodian, and in effect each series is a separate fund.
Each share of each series, when issued, is fully paid and non-assessable.
Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except
that certain matters must be voted on by the series of shares affected, and
matters affecting only one series are voted upon only by that series.
Shares have non-cumulative voting rights, which means that holders of
more than 50% of the net asset value of the shares voting for election of
directors can elect all of the directors if they choose to do so, and, in
such event, the holders of the remaining minority will not be able to elect
any person or persons to the board of directors.
An insurance company issuing a variable contract invested in shares
issued by TCI Portfolios will request voting instructions from contract
holders and will vote shares in proportion to the voting instructions
received.
In the event of the complete liquidation or dissolution of TCI
Portfolios, shareholders of each series of shares shall be entitled to
receive, pro rata, all of the assets less the liabilities of that series.
TCI PORTFOLIOS RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES,
PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE
STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN
THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
14
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TCI PORTFOLIOS, INC.
TCI International
Prospectus
April 1, 1996
[company logo]
TCI PORTFOLIOS, INC.
Part of the Twentieth Century
Family of Funds
- -----------------------------------------
P.O. Box 419385
- -----------------------------------------
Kansas City, Missouri
- -----------------------------------------
64141-6385
1-800-345-3533 or 816-531-5575
[company logo]
================================================================================
- --------------------------------------------------------------------------------
IN-BKT-4185
9601 Recycled
(C) 1996 Twentieth Century Services, Inc.
<PAGE>
[the following in red print along left margin of page]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JANUARY 16, 1996[in red print]
TCI PORTFOLIOS, INC.
TCI Value
Prospectus
APRIL 1,
1996
- --------------------------------------------------------------------------------
TCI Portfolios, Inc. ("TCI Portfolios") is a mutual fund that offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. The fund currently offers five portfolios or
series. TCI Value is described in this prospectus. The other series are
described in separate prospectuses. TCI Value is sometimes hereinafter referred
to as the "fund." You should consult the prospectus of the separate account of
the specific insurance product that accompanies this prospectus to see which
series of TCI Portfolios are available for purchase for such insurance product.
The investment objective of TCI Value is long-term capital growth. Income
is a secondary objective. The fund will seek to achieve its investment objective
by investing in securities that management believes to be undervalued at the
time of purchase. There can be no assurance that the fund will achieve its
investment objective.
Shares of the fund may be purchased only by insurance companies for the
purpose of funding variable annuity or variable life insurance contracts. This
prospectus should be read in conjunction with the prospectus of the separate
account of the specific insurance product that accompanies this prospectus.
Additional information is included in the statement of additional
information dated April 1, 1996, and filed with the Securities and Exchange
Commission. It is incorporated in this prospectus by reference. To obtain a
copy, or to make any other inquiries, call or write:
TCI Portfolios, Inc.
4500 Main Street * P.O. Box 419385
Kansas City, Mo. 64141-6385 * 1-800-345-3533
Local and international calls: 816-531-5575
Telecommunications device for the deaf:
1-800-345-1833 * In Missouri: 816-753-0070
This prospectus gives you information about TCI Portfolios that you should
know before investing. Keep it for future reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INFORMATION REGARDING THE FUND
Investment Policies of the Fund..........................................4
Shareholders of TCI Portfolios...........................................5
Other Investment Policies................................................5
Foreign Securities....................................................5
Equity Securities.....................................................5
Forward Currency Exchange Contracts...................................6
Portfolio Turnover....................................................7
Repurchase Agreements.................................................7
Index Futures Contracts...............................................7
Derivative Securities.................................................8
Portfolio Lending.....................................................8
When-Issued Securities................................................9
Short Sales...........................................................9
Rule 144A Securities..................................................9
Performance Advertising.................................................10
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price.............................................................10
Purchase and Redemption of Shares....................................10
When Share Price is Determined.......................................11
How Share Price is Determined........................................11
Distributions...........................................................11
Taxes...................................................................12
Management..............................................................12
Further Information About
TCI Portfolios, Inc..................................................13
2
<PAGE>
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED BY TCI PORTFOLIOS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY THE COMPANY, AND YOU SHOULD NOT RELY ON ANY OTHER
INFORMATION OR REPRESENTATION.3
3
<PAGE>
INFORMATION REGARDING THE FUNDS
- --------------------------------------------------------------------------------
INVESTMENT POLICIES OF THE FUND
TCI Portfolios has adopted certain investment restrictions applicable to
the fund that are set forth in the statement of additional information. Those
restrictions, as well as the investment objective of the fund, as identified
on the front cover page, and any other investment policies designated as
"fundamental" in this prospectus or in the statement of additional
information, cannot be changed without the approval of the shareholders
entitled to cast a majority of the outstanding votes of the corporation, as
defined by the Investment Company Act. The fund has implemented additional
investment policies and practices to guide its activities in the pursuit of
its investment objective. These policies and practices, which are described
throughout this prospectus, are not designated as fundamental policies and
may be changed without shareholder approval.
The investment objective of TCI Value is long-term capital growth.
Income is a secondary objective. The fund will seek to achieve its investment
objective by investing primarily in equity securities of well-established
companies with intermediate-to-large market capitalizations that are believed
by management to be undervalued at the time of purchase.
Securities may be undervalued because they are temporarily out of favor
in the market due to market decline, poor economic conditions, or actual or
anticipated unfavorable developments affecting the issuer of the security or
its industry, or because the market has overlooked them. Under normal market
conditions, the fund expects to invest at least 80% of the value of its total
assets in equity securities. The fund's investments will typically be
characterized by lower price-to-earnings, price-to-cash flow and/or
price-to-book value ratios relative to the equity market in general. Its
investments also may have above-average current dividend yields.
It is management's intention that the fund will primarily consist of
domestic equity securities. However, the fund also may invest in other types
of domestic or foreign securities consistent with the accomplishment of the
fund's objective. The other securities the fund may invest in are convertible
securities (see "Other Investment Policies -- Equity Securities," page 5),
preferred stocks, bonds, notes and debt securities of companies and debt
obligations of governments and their agencies. Investments in these
securities will be made when the manager believes that the total return
potential on these securities equals or exceeds the potential return on
common stocks.
The fund's holdings will be spread among industry groups that meet its
investment criteria to help reduce certain of the risks inherent in common
stock investments. These investments will primarily be securities listed on
major exchanges or traded in the over-the-counter markets.
With the exception of convertible securities (see, "Other Investment
Policies -- Equity Securities," page 5), the fund will limit purchases of
debt securities to "investment grade" obligations, which means that, at the
time of purchase, such obligations are rated within the four highest
categories by a nationally recognized statistical rating organization [for
example, at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB
by Standard & Poor's Corporation ("S&P")], or, if not rated, are of
equivalent investment quality as determined by management. There is no limit
on the amount of investments that can be made in securities rated in a
particular investment grade ratings category. According to Moody's, bonds
rated Baa are medium-grade and possess some speculative characteristics. A
BBB rating by S&P indicates S&P's belief that a security exhibits a
satisfactory degree of safety and capacity for repayment but is more
vulnerable to adverse economic conditions or changing circumstances.
In addition to other factors that will affect its value, the value of a
fund's investments in fixed income securities will change as prevailing
interest rates change. In general, the prices of such securities vary
inversely with interest rates. As prevailing interest rates fall, the prices
of bonds and other
4
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securities that trade on a yield basis rise. When prevailing interest rates
rise, bond prices fall. These changes in value may, depending upon the
particular amount and type of fixed income securities holdings of a fund,
impact the net asset value of the fund's shares.
Notwithstanding the fact the fund will primarily invest in equity
securities, under exceptional market or economic conditions, the fund may
temporarily invest all or a substantial portion of its assets in cash or
investment grade short-term securities (denominated in U.S. dollars or
foreign currencies).
To the extent that the fund assumes a defensive position, it will not be
investing for capital growth.
SHAREHOLDERS OF TCI PORTFOLIOS
TCI Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although TCI Portfolios does not foresee any disadvantages to contract owners
due to the fact that it offers its shares as an investment medium for both
variable annuity and variable life products, the interests of various
contract owners participating in the funds of TCI Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, TCI Portfolios' board of
directors will monitor events in order to identify any material
irreconcilable conflicts that may possibly arise and to determine what
action, if any, should be taken in response to such conflicts. If a conflict
were to occur, an insurance company separate account might be required to
withdraw its investments in the funds of TCI Portfolios and those funds might
be forced to sell securities at disadvantageous prices to fund such
withdrawal.
OTHER INVESTMENT POLICIES
For additional information regarding the fund and its investment
policies, see "Investment Restrictions Applicable to all Series of Shares" in
the statement of additional information.
FOREIGN SECURITIES
The fund may invest up to 25% of its assets in the securities of foreign
issuers, including debt securities of foreign governments and their
agen-cies, when these securities meet its standards of selection. The
principal business activities of such issuers will be located in developed
countries.
The fund may make such investments either directly in foreign securities
or indirectly by purchasing depositary receipts or depositary shares of
similar instruments ("DRs") for foreign securities. DRs are securities that
are listed on exchanges or quoted in the domestic over-the-counter markets in
one country but represent shares of issuers domiciled in another country.
Direct investments in foreign securities may be made either on foreign
securities exchanges or in the over-the-counter markets.
Subject to its investment objective and policies, the fund may invest in
common stocks, convertible securities, preferred stocks, bonds, notes and
other debt securities of foreign issuers and debt securities of foreign
governments and their agencies. The credit quality standards applicable to
domestic securities purchased by the fund are also applicable to its foreign
securities investments.
Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future
political and economic developments, reduced availability of public
information concerning issuers, securities clearance and settlement
procedures, and the fact that foreign issuers are not generally subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to
domestic issuers.
EQUITY SECURITIES
In addition to investing in common stocks, the fund may invest in other
equity securities and equity equivalents. Other equity securities and
5
<PAGE>
equity equivalents include securities that permit the fund to receive an
equity interest in an issuer, the opportunity to acquire an equity interest
in an issuer, or the opportunity to receive a return on its investment that
permits the fund to benefit from the growth over time in the equity of an
issuer. Examples of equity securities and equity equivalents include
preferred stock, convertible preferred stock and convertible debt securities.
The fund will limit its purchase of convertible debt securities to those
that, at the time of purchase, are rated at least B- by S&P or B3 by Moody's,
or if not rated by S&P or Moody's are of equivalent investment quality as
determined by management. Debt securities rated below the four highest
categories are not considered "investment grade" obligations. These
securities have speculative characteristics and present more credit risk than
investment grade obligations. (For a description of the S&P and Moody's
ratings categories, see "An Explanation of Fixed Income Securities Ratings,"
page 7 of the Statement of Additional Information.) Equity equivalents may
also include securities whose value or return is derived from the value or
return of a different security. An example of the type of derivative security
in which the fund might invest includes depositary receipts.
FORWARD CURRENCY
EXCHANGE CONTRACTS
Some of the securities held by the fund may be denominated in foreign
currencies. Other securities, such as DRs, may be denominated in U.S. dollars
but have a value that is dependent on the performance of a foreign security,
as valued in the currency of its home country. As a result, the value of the
fund's portfolio may be affected by changes in the exchange rate between
foreign currencies and the U.S. dollar, as well as by changes in the market
value of the securities themselves. The performance of foreign currencies
relative to the dollar may be a factor in the fund's overall performance.
To protect against adverse movements in exchange rates between
currencies, the fund may, for hedging purposes only, enter into forward
currency exchange contracts. A forward currency exchange contract obligates
the fund to purchase or sell a specific currency at a future date at a
specific price.
The fund may elect to enter into a forward currency exchange contract
with respect to a specific purchase or sale of a security, or with respect to
the fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to
the specific purchase or sale of a security denominated in a foreign
currency, the fund can "lock in" an exchange rate between the trade and
settlement dates for that purchase or sale. This practice is sometimes
referred to as "transaction hedging." The fund may enter into transaction
hedging contracts with respect to all or a substantial portion of its foreign
securities trades.
When the manager believes that a particular currency may decline in
value compared to the dollar, the fund may enter into forward currency
exchange contracts to sell an amount of foreign currency equal to the value
of some or all of the fund's portfolio securities either denominated in, or
whose value is tied to, that currency. This practice is sometimes referred to
as "portfolio hedging." A fund may not enter into a portfolio hedging
transaction where the fund would be obligated to deliver an amount of foreign
currency in excess of the aggregate value of the fund's portfolio securities
or other assets denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the fund will
enter into portfolio hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund,
when required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover
its obligation under the contract. Those assets will be valued at market
daily, and if the value of the segregated securities declines, additional
cash or securities
6
<PAGE>
will be added so that the value of the account is not less than the amount
of the fund's commitment. At any given time, no more than 10% of a fund's
assets will be committed to a segregated account in connection with portfolio
hedging transactions.
Predicting the relative future values of currencies is very difficult,
and there is no assurance that any attempt to protect the fund against
adverse currency movements through the use of forward currency exchange
contracts will be successful. In addition, the use of forward currency
exchange contracts tends to limit the potential gains that might result from
a positive change in the relationship between the foreign currency and the
U.S. dollar.
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's
objectives. Management believes that the rate of portfolio turnover is
irrelevant when it believes a change is in order to achieve those objectives
and, accordingly, the annual portfolio turnover rate cannot be accurately
predicted.
The portfolio turnover of the fund may be higher than other investment
companies with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the fund
pays directly. Portfolio turnover may also affect the character of capital
gains, if any, realized and distributed by the fund since short-term capital
gains are taxable as ordinary income.
REPURCHASE AGREEMENTS
The fund may invest up to 20% of its assets 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
fund's investment policies.
A repurchase agreement occurs when the fund purchases an
interest-bearing obligation from a bank or broker-dealer registered under the
Securities Exchange Act of 1934 and simultaneously agrees to sell it back on
a specified date in the future (usually less than one week later) at a higher
price. The repurchase price reflects an agreed-upon interest rate during the
time the fund's money is invested in the security and is considered by the
staff of the Securities and Exchange Commission to be a loan by the fund.
The fund's risk in connection with repurchase agreements is the ability
of the seller to pay the repurchase price on the repurchase date. If the
seller defaults, the fund may incur costs, delays or losses. Management
monitors the creditworthiness of sellers.
The fund will not invest more than 15% of its assets in repurchase
agreements maturing in more than seven days.
The fund will enter into repurchase agreements only with those
commercial banks and broker-dealers whose creditworthiness has been reviewed
and found satisfactory by the fund's management pursuant to criteria adopted
by the fund's board of directors.
INDEX FUTURES CONTRACTS
The fund may enter into domestic stock index futures contracts. An index
futures contract is an agreement to take or make delivery of an amount of
cash based on the difference between the value of the index at the beginning
and at the end of the contract period. Rather than actually purchasing the
securities of an index, the manager may purchase a futures contract, which
reflects the value of such underlying securities. For example, S&P 500
futures reflect the value of the underlying companies that comprise the S&P
500 Composite Stock Price Index. If the aggregate market value of the
underlying index securities increases or decreases during the contract
period, the value of the S&P 500 futures can be expected to reflect such
increase or decrease. As a result, the manager is able to expose to the
equity markets cash that is maintained by the
7
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fund to meet anticipated redemptions or held for future investment
opportunities. Because futures generally settle within a day from the date
they are closed out (compared with three days for the types of equity
securities primarily invested in by the funds) the manager believes that this
use of futures allows the fund to effectively be fully invested in equity
securities while maintaining the liquidity needed by the fund.
When a fund enters into a futures contract, it must make deposit of cash
or high-quality debt securities, known as "initial margin," as partial
security for its performance under the contract. As the value of the index
fluctuates, either party to the contract is required to make additional
margin payments, known as "variation margin," to cover any additional
obligation it may have under the contract. Assets set aside by the fund as
initial or variable margin may not be disposed of so long as the fund
maintains the contract.
The fund may not purchase leveraged futures. The fund will deposit in a
segregated account with its custodian bank cash or high-quality debt
securities in an amount equal to the fluctuating market value of the index
contracts it has purchased, less any margin deposited on its position. The
fund will only invest in exchange-traded futures. In addition, the value of
index futures contracts purchased by a fund may not exceed 5% of the fund's
total assets.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the
fund may invest in securities that are commonly referred to as "derivative"
securities. Certain derivative securities are more accurately described as
"index/ structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities
(such as DRs or S&P 500 futures), currencies, interest rates, indices or
other financial indicators ("reference indices"). The fund may not invest in
an index/structured 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 S&P 500 Index would be a
permissible investment since the fund may invest in the securities of
companies comprising the S&P 500 Index (assuming they otherwise meet the
other requirements for the fund), while a security whose underlying value is
linked to the price of oil would not be a permissible investment since the
fund may not invest in oil and gas leases or futures.
The return of an index/structured security may increase or decrease,
depending upon changes in the reference index. No purchases will be made of
index/structured securities having "leverage" characteristics. This means
that no investments will be made in securities whose change in underlying
value is a multiple of the change in the reference index. In no event will an
index/structured security be purchased if its value (or referenced value)
exceeds the available cash of the fund.
Because their performance is tied to a reference index, investing in
index/structured securities, in addition to being exposed to the credit risk
of the issuer of the security, will also expose the fund to the market risk
of changes in the reference index.
The fund's board of directors has approved management'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. Management will report on fund
activity in derivative securities to the board of directors as necessary. In
addition, the board will review management's policy for investments in
derivative securities annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
8
<PAGE>
creditworthy. Such loans must be secured continuously by cash, collateral or
by irrevocable letters of credit maintained on a current basis in an amount
at least equal to the market value of the securities loaned. During the
existence of the loan, the fund must continue to receive the equivalent of
the interest and dividends paid by the issuer on the securities loaned and
interest on the investment of the collateral. The fund must have the right to
call the loan and obtain the securities loaned at any time on five days'
notice, including the right to call the loan to enable TCI Portfolios to vote
the securities. Such loans may not exceed one-third of the fund's net assets
valued at market. The portfolio lending policy described in this paragraph is
fundamental policy that may be changed only by a vote of TCI Portfolios'
shareholders.
WHEN-ISSUED SECURITIES
The fund may purchase new issues of securities on a when-issued basis
without limit when, in the opinion of management, such purchases will further
the investment objectives of the fund. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery of and
payment for these securities typically occur 15 to 45 days after the
commitment to purchase. Market rates of interest on debt securities at the
time of delivery may be higher or lower than those contracted for on the
when-issued security. Accordingly, the value of such security may decline
prior to delivery, which could result in a loss to the fund. A separate
account consisting of cash or high-quality liquid debt securities in an
amount at least equal to the when-issued commitments will be established and
maintained with the custodian. No income will accrue to the fund prior to
delivery.
SHORT SALES
The fund may engage in short sales if, at the time of the short sale,
the fund owns or has the right to acquire an equal amount of the security
being sold short at no additional cost. These transactions allow the fund to
hedge against price fluctuations by locking in a sale price for securities it
does not wish to sell immediately.
The fund may make a short sale when it wants to sell the security it
owns at a current attractive price, but also wishes to defer recognition of
gain or loss for federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code.
RULE 144A SECURITIES
The fund will not invest more than 15% of its assets in illiquid
securities (securities that may not be sold within seven days at
approximately the price used in determining the net asset value of fund
shares), including restricted securities. Although securities which may be
resold only to qualified institutional buyers in accordance with the
provisions of Rule 144A under the Securities Act of 1933 are considered
"restricted securities," the fund may purchase Rule 144A securities without
regard to the 15% limitation described above when Rule 144A securities
present an attractive investment opportunity that otherwise meets TCI
Portfolios' criteria of selection and also meets the liquidity guidelines
established for Rule 144A securities.
With respect to securities eligible for resale under Rule 144A, the
staff of the Securities and Exchange Commission has taken the position that
the liquidity of such securities in the portfolio of a fund offering
redeemable securities is a question of fact for the board of directors to
determine, such determination to be based upon a consideration of the readily
available trading markets and the review of any contractual restrictions.
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 TCI
Portfolios has delegated the day-to-day function of determining the liquidity
of Rule 144A securities to the manager.
9
<PAGE>
The board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities is limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may, from time to time, hold a Rule 144A
security that is illiquid. In such an event, TCI Portfolios will consider
appropriate remedies to minimize the effect on such fund's liquidity.
PERFORMANCE ADVERTISING
From time to time TCI Portfolios (or the insurance companies that use
TCI Portfolios to fund the benefits of variable annuity or variable life
insurance contracts) may advertise performance data. Fund performance may be
shown by presenting one or more performance measurements, including
cumulative total return and average annual total return.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compounded return over a stated period of time that
would have produced the fund's cumulative total return over the same period
if the fund's performance had remained constant throughout.
TCI Portfolios may also include in advertisements data comparing
performance with the performance of non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations (such as Lipper Analytical Services) and publications that
monitor the performance of mutual funds. Performance information may be
quoted numerically or may be represented in a table, graph or other
illustration. In addition, fund performance may be compared to well-known
indices of market performance, including the Standard & Poor's (S&P) 500
Index, The Dow Jones Industrial Average and The S&P/Barra Value Index. Fund
performance may also be compared to other funds in the Twentieth Century
family. It may also be combined or blended with other funds in the Twentieth
Century family, and that combined or blended performance may be compared to
the same indices to which individual funds may be compared.
All performance information advertised by TCI Portfolios 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.
PERFORMANCE FIGURES ADVERTISED BY TCI PORTFOLIOS SHOULD NOT BE USED FOR
COMPARATIVE PURPOSES BECAUSE THESE FIGURES WILL NOT INCLUDE CHARGES AND
DEDUCTIONS IMPOSED BY THE INSURANCE COMPANY SEPARATE ACCOUNT UNDER THE
VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS.
ADDITIONAL INFORMATION YOU SHOULD KNOW
- --------------------------------------------------------------------------------
SHARE PRICE
PURCHASE AND
REDEMPTION OF SHARES
For instructions on how to purchase and redeem shares, read the
prospectus of your insurance company's separate account.
Shares of TCI Portfolios are sold and redeemed by TCI Portfolios at
their net asset value next determined after receipt by the insurance company
separate account of the order from the variable annuity or variable life
insurance contract owner to purchase or to redeem. There are no sales
commissions or redemption charges. However, certain sales or deferred sales
charges
10
<PAGE>
and other charges may apply to the variable annuity or life insurance
contracts. Those charges are disclosed in the separate account prospectus.
WHEN SHARE PRICE IS DETERMINED
The price of TCI Portfolios' shares is their net asset value. Net asset
value is determined at the close of business of the New York Stock Exchange,
usually 3 p.m. Central time, on each day that the Exchange is open. Requests
to redeem shares and investments received by the separate account before the
close of business of the Exchange are effective, and will receive the price
determined, on the day received. Redemption requests and investments received
thereafter are effective on, and receive the price determined as of, the
close of the Exchange the next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be
summarized as follows:
The portfolio securities of the fund, except as otherwise noted, listed
or traded on a stock exchange are valued at the latest sale price on the
exchange where they are primarily traded. If no sale is reported, the mean of
the latest bid and asked prices is used. Securities traded over the counter
are priced at the mean of the latest bid and asked prices, but will be valued
at the last sale price if required by regulations of the Securities and
Exchange Commission. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good
faith 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.
Pursuant to a determination by TCI Portfolios' board of directors that
such value represents fair value, debt securities with maturities of 60 days
or less are valued at amortized cost. When a security is valued at amortized
cost, it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument.
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 of the New York Stock Exchange,
if that is earlier. That value is then converted to U.S. 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 which was likely to
materially change the net asset value, then that security would be valued at
fair value as determined by the board of directors. Trading of securities in
foreign markets may not take place on every New York Stock Exchange business
day. In addition, trading may take place in various foreign markets on
Saturdays or on other days when the New York Stock Exchange is not open and
on which the fund's net asset value is not calculated. Therefore, such
calculation does not take place contemporaneously with the determination of
the prices of many of the portfolio securities used in such calculation and
the value of the fund's portfolio may be affected on days when shares of the
fund may not be purchased or redeemed.
DISTRIBUTIONS
Distributions from net investment income and realized securities gains,
if any, generally are declared and paid once a year, but the fund may
11
<PAGE>
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner
consistent with the provisions of the Investment Company Act. All
distributions from the fund will be reinvested in additional shares.
The board of directors may elect not to distribute capital gains in
whole or in part to take advantage of loss carryovers.
TAXES
TCI Portfolios intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. For a discussion of the tax
status of your variable contract, refer to the prospectus of your insurance
company's separate account.
MANAGEMENT
Under the laws of the State of Maryland, the board of directors is
responsible for managing the business and affairs of TCI Portfolios. Acting
pursuant to an investment advisory agreement entered into with TCI
Portfolios, Investors Research Corporation ("Investors Research") serves as
the investment manager of TCI Portfolios. Its principal place of business is
4500 Main Street, Kansas City, Missouri 64111.
Investors Research has been providing investment advisory services to
investment companies and institutional investors since 1958. Certain
investments may be appropriate for TCI Portfolios and also for other clients
advised by Investors Research. Investment decisions are made with the
intention of achieving the respective investment objectives of Investors
Research's clients 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 in different amounts and at different times for more than one
but less than all clients. In addition, purchases or sales of the same
security may be made for two or more clients on the same date. Such
transactions will be allocated among clients in a manner believed by
Investors Research 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 TCI Portfolios.
Investors Research supervises and manages the investment portfolio of
the fund and directs the purchase and sale of its investment securities.
Investors Research utilizes a team of portfolio managers, assistant portfolio
managers and analysts acting together to manage the assets of the fund. The
team meets regularly to review portfolio holdings and to discuss purchase and
sale activity. The team adjusts holdings in the fund's portfolio as they deem
appropriate in pursuit of the fund's investment objectives. Individual
portfolio manager members of the team may also adjust portfolio holdings of
the funds as necessary between team meetings.
The portfolio manager members of the TCI Value team and their principal
business experience for the last five years are as follows:
ROBERT C. PUFF, JR., Executive Vice President and Chief Investment
Officer, has been a Portfolio Manager for more than five years, having joined
Investors Research in 1983. In his position as Chief Investment Officer, Mr.
Puff oversees the investment activities of all of the teams that manage TCI
Portfolios funds.
PETER A. ZUGER, Vice President and Portfolio Manager, joined Investors
Research in June 1993 as a Portfolio Manager. Prior to joining Investors
Research, Mr. Zuger served as an investment manager in the Trust Department
of NBD Bancorp in Detroit, Michigan.
PHILLIP N. DAVIDSON, Vice President and Portfolio Manager, joined
Investors Research in September 1993 as a Portfolio Manager. Prior to joining
Investors Research, Mr. Davidson served as an investment manager for
Boatmen's Trust Company in St. Louis, Missouri.
The activities of Investors Research are subject only to directions of
TCI Portfolios' board of directors. Investors Research pays all
12
<PAGE>
the expenses of TCI Portfolios except brokerage, taxes, interest, fees,
expenses of the non-interested person directors (including counsel fees) and
extraordinary expenses.
For the foregoing services, Investors Research is paid a fee of % of the
average net assets of the fund during the year. The fee is paid and computed
on the first business day of each month by multiplying % of the average daily
closing net asset values of the shares of the fund during the previous month
by a fraction, the numerator of which is the number of days in the previous
month and the denominator of which is 365 (366 in leap years). Many
investment companies pay smaller investment management fees. However, most if
not all of such companies also pay, in addition to an investment management
fee, certain of their own expenses, while almost all of TCI Portfolios'
expenses, as noted above, are paid by Investors Research.
TCI Portfolios and Investors Research have adopted a Code of Ethics (the
"Code"), which restricts personal investing practices by employees of
Investors Research and its affiliates. Among other provisions, the Code
requires that employees with access to information about the purchase or sale
of securities in the fund's portfolios obtain preclearance before executing
personal trades. With respect to portfolio managers and other investment
personnel, the Code prohibits acquisition of securities in an initial public
offering, as well as profits derived from the purchase and sale of the same
security within 60 calendar days. These provisions are designed to ensure
that the interests of fund shareholders come before the interests of the
people who manage those funds.
Twentieth Century Services, Inc., 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend paying agent of TCI
Portfolios. It provides facilities, equipment and personnel to TCI Portfolios
and is paid for such services by Investors Research. Certain administrative
and record keeping services that would otherwise be performed by Twentieth
Century Services, Inc. may be performed by the insurance company that
purchases TCI Portfolios' shares, and Investors Research may pay the
insurance company for such services.
Investors Research and Twentieth Century Services, Inc., are both wholly
owned by Twentieth Century Companies, Inc. James E. Stowers Jr., chairman and
chief executive officer of TCI Portfolios, controls Twentieth Century
Companies, Inc. by virtue of his voting control of a majority of its common
stock.
FURTHER INFORMATION
ABOUT TCI PORTFOLIOS, INC.
TCI Portfolios was organized as a Maryland corporation on June 4, 1987.
It is a diversified, open-end management investment company. Its business and
affairs are managed by its officers under the direction of its board of
directors.
The principal office of TCI Portfolios is 4500 Main Street, P.O. Box
419385, Kansas City, Missouri 64141-6385. All inquiries may be made by mail
to that address or by phone to 816-531-5575.
TCI Portfolios issues five series of common stock with a par value of
$.01 per share. The assets belonging to each series of shares are held
separately by the custodian, and in effect each series is a separate fund.
Each share of each series, when issued, is fully paid and non-assessable.
Each share, irrespective of series, is entitled to one vote for each
dollar of net asset value applicable to such share on all questions, except
that certain matters must be voted on by the series of shares affected, and
matters affecting only one series are voted upon only by that series.
Shares have non-cumulative voting rights, which means that holders of
more than 50% of the net asset value of the shares voting for election of
directors can elect all of the directors if they choose to do so, and, in
such event, the holders of the remaining minority will not be able to elect
any person or persons to the board of directors.
An insurance company issuing a variable contract invested in shares
issued by TCI
13
<PAGE>
Portfolios will request voting instructions from contract holders and will
vote shares in proportion to the voting instructions received.
In the event of the complete liquidation or dissolution of TCI
Portfolios, shareholders of each series of shares shall be entitled to
receive, pro rata, all of the assets less the liabilities of that series.
TCI PORTFOLIOS RESERVES THE RIGHT TO CHANGE ANY OF ITS POLICIES,
PRACTICES AND PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE
STATEMENT OF ADDITIONAL INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN
THOSE INSTANCES WHERE SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
14
<PAGE>
TCI PORTFOLIOS, INC.
TCI Value
Prospectus
April 1, 1996
[company logo]
TCI PORTFOLIOS, INC.
Part of the Twentieth Century
Family of Funds
- ----------------------------------------
P.O. Box 419385
- ----------------------------------------
Kansas City, Missouri
- ----------------------------------------
64141-6385
1-800-345-3533 or 816-531-5575
[company logo]
================================================================================
- --------------------------------------------------------------------------------
IN-BKT-4181
9601 Recycled
(C) 1996 Twentieth Century Services, Inc.
<PAGE>
[the following in red print along left margin of page]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JANUARY 16, 1996 [red print]
TCI Portfolios, Inc.
Statement of Additional Information
APRIL 1,
1996
- --------------------------------------------------------------------------------
This statement is not a prospectus but should be read in conjunction with
the applicable current TCI Portfolios, Inc. prospectus of its five series of
shares, TCI Growth, TCI Value, TCI Balanced, TCI Advantage or TCI International
as the case may be. Each of such prospectuses is dated April 1, 1996. Please
retain this document for future reference. To obtain copies of the various TCI
Portfolios prospectuses, call TCI Portfolios at 1-800-345-3533 or 816-531-5575,
or write to P.O. Box 419385, Kansas City, Missouri 64141-6385.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
TCI TCI TCI TCI TCI
Page Growth Value Balanced Advantage International
Herein Prospectus Prospectus Prospectus Prospectus Prospectus
Page Page Page Page Page
<S> <C> <C> <C> <C> <C> <C>
Selection of Investments 2 4 4 4 4 4
Investment Restrictions Applicable
to All Series of Shares 2 -- -- -- -- --
Short Sales 4 7 7 9 9 8
Portfolio Turnover 4 -- -- -- -- --
Performance Advertising 5 8 9 9 9 9
Officers and Directors 6 -- -- -- -- --
Management 8 10 12 12 12 12
Custodian 8 -- -- -- -- --
Auditors 9 -- -- -- -- --
Capital Stock 9 -- -- -- -- --
Brokerage 9 -- -- -- -- --
Redemptions in Kind 10 -- -- -- -- --
Holidays 11 -- -- -- -- --
Financial Statements 11 -- -- -- -- --
</TABLE>
================================================================================
<PAGE>
SELECTION OF INVESTMENTS
-----------------------------------------------------------------------------
Currently, TCI Portfolios offers five funds: TCI Growth, TCI Value, TCI
Balanced, TCI Advantage and TCI International. Such funds are sometimes
individually referred to as a "fund," and collectively as the "funds."
TCI GROWTH
In achieving their investment objectives, the funds of TCI Portfolios
must conform to certain fundamental policies that may not be changed without
shareholder approval.
The following paragraph is a statement of fundamental policy with
respect to investment selection:
In general, within the restrictions outlined in the prospectus or in
other statements of the corporation's fundamental policies, TCI Growth, TCI
Value, TCI International and, with regard to the equity portion of their
portfolios, TCI Balanced and TCI Advantage, each has broad power with respect
to investing funds or holding them uninvested. Investments are varied
according to what is judged advantageous under changing economic conditions.
It is the management's intention that TCI Growth, TCI Value, TCI
International and the equity portion of TCI Balanced and TCI Advantage will
generally consist of common stocks. However, the investment manager may
invest the assets in varying amounts in other instruments and in senior
securities, such as bonds, debentures and preferred stocks, when such a
course is deemed appropriate under certain market and economic conditions.
Senior securities that, in the opinion of management, are high-grade issues
may also be purchased for defensive purposes.
TCI VALUE
Management intends to invest the assets of TCI Value primarily in equity
securities of well-established companies with intermediate-to-large market
capitalizations which management believes to be undervalued at the time of
purchase. The selection of these investments is described above under
"Selection of Investments--TCI Growth."
TCI BALANCED
Management intends to invest the TCI Balanced portfolio approximately
60% in common stocks and the remainder in fixed income securities. Equity
security investments are described above under "Selection of Investments--TCI
Growth." At least 80% of the fixed income assets will be invested in
securities that, at the time of purchase, are rated by a nationally
recognized statistical rating organization within the three highest
categories. The fund may invest in securities of the United States government
and its agencies and instrumentalities, corporate, sovereign government,
municipal, mortgage-related, and other asset-backed securities. It can be
expected that management will invest from time to time in bonds and preferred
stock convertible into common stock.
TCI ADVANTAGE
Management intends to invest approximately (i) 20% of TCI Advantage's
assets in government securities with a weighted average maturity of six
months or less, i.e., cash and cash equivalents, (ii) 40% of the fund's
assets in fixed income government securities with a weighted average maturity
of three to 10 years (although management has the discretion to invest some
or all of this portion of the fund's assets in cash or cash equivalents if it
believes that market conditions merit) and (iii) 40% of the fund's assets in
equity securities. All of the debt securities purchased, regardless of
weighted average maturity, will be securities of the U.S. government and its
agencies and instrumentalities, including mortgage-related and other
asset-backed securities issued by such entities. Equity security investments
are described above under "Selection of Investments--TCI Growth."
TCI INTERNATIONAL
Management intends to invest the assets of TCI International primarily
in an internationally diversified portfolio of common stocks. The selection
of these investments is described above under "Selection of Investments--TCI
Growth."
2
<PAGE>
INVESTMENT RESTRICTIONS APPLICABLE TO ALL SERIES
OF SHARES
-----------------------------------------------------------------------------
Additional fundamental policies applicable to TCI Portfolios that may be
changed only with shareholder approval provide that:
(1) No series of shares shall invest more than 15% of its assets in illiquid
investments;
(2) No series of shares shall invest in the securities of companies that,
including predecessors, have a record of less than three years'
continuous operation;
(3) No series of shares shall make loans to other persons, but may lend its
portfolio securities to unaffiliated persons. Such loans must be secured
continuously by cash collateral maintained on a current basis in an
amount at least equal to the market value of the securities loaned;
during the existence of the loan, the corporation must continue to
receive the equivalent of the interest and dividends paid by the issuer
on the securities loaned and interest on the investment of the
collateral; the corporation must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including
the right to call the loan to enable the corporation to vote the
securities. The interest and dividends on loaned securities of either
series may not exceed 10% of the annual gross income of that series
(without offset for realized capital gains);
(4) No series of shares shall purchase the security of any one issuer if
such purchase would cause more than 5% of the assets of such series at
market to be invested in the securities of such issuer, except United
States government securities, or if the purchase would cause more than
10% of the outstanding voting securities of any one issuer to be held in
the portfolio of such series;
(5) No series of shares shall invest for control or for management, or
concentrate its investment in a particular company or a particular
industry. No more than 25% of the assets of each series, exclusive of
cash and government securities, will be invested in securities of any
one industry. The corporation may make its own reasonable industry
classifications based on information derived from published manuals,
financial database services, and the corporation's analysis of the
financial statements of affected companies;
(6) No series of shares shall buy securities on margin or sell short (unless
it owns, or by virtue of its ownership of other securities has the right
to obtain securities equivalent in kind and amount to, the securities
sold), or write put or call options;
(7) No series of shares shall purchase shares of another investment company
if immediately after the purchase (a) the corporation owns more than 3%
of the total outstanding stock of the other investment company, or (b)
the securities which the corporation owns of the other investment
company exceed 5% of the total assets of the corporation, or (c) the
securities which the corporation owns of all other investment companies
exceed 10% of the value of the total assets of the corporation;
(8) No series of shares shall issue any senior security;
(9) No series of shares shall underwrite any security;
(10) No series of shares shall purchase or sell real estate or real estate
mortgage loans but may invest in securities of issuers that deal in real
estate or real estate mortgage loans;
(11) No series of shares shall purchase or sell commodities or commodity
contracts, including futures contracts; and
(12) No series of shares shall borrow any money with respect to any series of
its stock, except in an amount not in excess of 5% of the total assets
of the series, and then only for emergency and extraordinary purposes,
including payment for shares redeemed.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the corporation of securities issued by insurance companies,
brokers, dealers, underwriters or investment advisers, and upon transactions
with affiliated per-
3
<PAGE>
sons as therein defined. It also defines and forbids the creation of cross
and circular ownership.
To comply with the requirements of state securities administrators, TCI
Portfolios may, from time to time, agree to additional investment
restrictions. These restrictions are not fundamental policies and may be
adopted, revised or withdrawn, without shareholder approval, as required or
permitted by the various state securities administrators.
Neither the Securities and Exchange Commission nor any other agency of
the federal government participates in or supervises the corporation's
management or its investment practices or policies.
INDEX FUTURES CONTRACT
-----------------------------------------------------------------------------
As described in the prospectus, TCI Value may enter into domestic stock
index futures contracts. Unlike when a fund purchases securities, no purchase
price for the underlying securities is paid by the fund at the time it
purchases a futures contract. When a futures contract is entered into, both
the buyer and seller of the contract are required to deposit with a futures
commission merchant ("FCM") cash or high-grade debt securities in an amount
equal to a percentage of the contract's value, as set by the exchange on
which the contract is traded. This amount is known as "initial margin" and is
held by the fund's custodian for the benefit of the FCM in the event of any
default by the fund in the payment of any future obligations.
The value of the index futures is adjusted daily to reflect the
fluctuation of the value of the underlying securities that comprise the
index. This is a process known as marking the contract to market. If the
value of a party's position declines, that party is required to make
additional "variation margin" payments to the FCM to settle the change in
value. The party that has a gain may be entitled to receive all or a portion
of this amount. The FCM may have access to the fund's margin account only
under specified conditions of default.
The fund maintains from time to time a percentage of their assets in
cash or high-grade liquid securities to provide for redemptions or to hold
for future investment in securities consistent with the fund's investment
objectives. The fund may enter into index futures contracts as an efficient
means to expose the fund's cash position to the domestic equity market. The
manager believes that the purchase of futures contracts is an efficient means
to effectively be fully invested in equity securities.
The fund intends to comply with guidelines of eligibility for exclusion
from the definition of the term "commodity pool operator" adopted by the
Commodity Futures Trading Commission ("CFTC") and the National Futures
Association, which regulate trading in the futures markets. To do so, the
aggregate initial margin required to establish such positions may not exceed
5% of the fair market value of the fund's net assets, after taking into
account unrealized profits and unrealized losses on any contracts it has
entered into.
The principal risks generally associated with the use of futures
include:
o the possible absence of a liquid secondary market for any particular
instrument may make it difficult or impossible to close out a position when
desired (liquidity risk);
o the risk that the counter party to the contract may fail to perform its
obligations or the risk of bankruptcy of the FCM holding margin deposits
(counter party risk);
o the risk that the index of securities to which the futures contract relates
may go down in value (market risk); and
o adverse price movements in the underlying index can result in losses
substantially greater than the value of the fund's investment in that
instrument because only a fraction of a contract's value is required to be
deposited as initial margin (leverage risk); PROVIDED, HOWEVER, that the
fund may not purchase leveraged futures, so there is no leverage risk
involved in the fund's use of futures.
A liquid secondary market is necessary to close out a contract. TCI
Value will seek to manage liquidity risk by investing only in exchange-traded
futures. Exchange-traded index futures pose less risk that there will not be
a liquid
4
<PAGE>
secondary market than privately negotiated instruments. Through their
clearing corporations, the futures exchanges guarantee the performance of the
contracts. Futures contracts are generally settled within a day from the date
they are closed out, as compared to three days for most types of equity
securities. As a result, futures contracts can provide more liquidity than an
investment in the actual underlying securities. Nevertheless, there is no
assurance that a liquid secondary market will exist for any particular
futures contract at any particular time. Liquidity may also be influenced by
an exchange-imposed daily price fluctuation limit, which halts trading if a
contract's price moves up or down more than the established limit on any
given day. On volatile trading days when the price fluctuation limit is
reached, it may be impossible for a fund to enter into new positions or close
out existing positions. If the secondary market for a futures contract is not
liquid because of price fluctuation limits or otherwise, the fund may not be
able to promptly liquidate unfavorable futures positions and potentially
could be required to continue to hold a futures position until liquidity in
the market is re-established. As a result, the fund's access to other assets
held to cover its futures positions also could be impaired until liquidity in
the market is re-established.
TCI Value manages counter-party risk by investing in exchange-traded
index futures. In the event of the bankruptcy of the FCM that holds margin on
behalf of the fund, the fund may be entitled to the return of margin owed to
the fund only in proportion to the amount received by the FCM's other
customers. The manager will attempt to minimize the risk by monitoring the
creditworthiness of the FCMs with which the fund does business.
The prices of futures contracts depend primarily on the value of their
underlying instruments. As a result, the movement in market price of index
futures contracts will reflect the movement in the aggregate market price of
the entire portfolio of securities comprising the index. Since TCI Value is
not an index fund, its investment in futures contracts will not correlate
precisely with the performance of the fund's other equity investments.
However, the manager believes that an investment in index futures will more
closely reflect the investment performance of the fund than an investment in
U.S. government or other highly liquid, short-term debt securities, which is
where the cash position of the fund would otherwise be invested.
The policy of the manager is to remain fully invested in equity
securities. There may be times when the manager deems it advantageous to the
fund not to invest excess cash in index futures, but such decision will
generally not be the result of an active effort to use futures to time or
anticipate market movements in general.
AN EXPLANATION OF FIXED
INCOME SECURITIES RATINGS
-----------------------------------------------------------------------------
As described in the prospectus, the funds may invest in fixed income
securities. Fixed income securities ratings provide the investment manager
with current assessment of the credit rating of an issuer with respect to a
specific fixed income security. The following is a description of the rating
categories utilized by the rating services referenced in the prospectus
disclosure:
The following summarizes the ratings used by Standard & Poor's
Corporation ("S&P") for bonds:
AAA--This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay
principal.
AA--Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only to a small
degree.
A--Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic con-
5
<PAGE>
ditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category
than in higher-rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions, which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B- rating.
CC--The rating CC typically is applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C--The rating C typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
To provide more detailed indications of credit quality, the ratings from
AA to CCC may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.
The following summarizes the ratings used by Moody's Investors Service,
Inc. ("Moody's") for bonds:
Aaa--Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa--Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
or fluctuation of protective elements may be of greater amplitude, or
there may be other elements present that make the long-term risk appear
somewhat larger than the Aaa securities.
A--Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment some
time in the future.
Baa--Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly
6
<PAGE>
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and, in fact, have
speculative characteristics as well.
Ba--Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times in the future.
Uncertainty of position characterizes bonds in this class.
B--Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa--Bonds that are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds that are rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds that are rated C are the lowest-rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa through B. The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
SHORT SALES
-----------------------------------------------------------------------------
Each of the funds may engage in short sales if, at the time of the short
sale, the fund owns or has the right to acquire an equal amount of the
security being sold short at no additional cost.
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short position
is maintained, the seller collateralizes its obligation to deliver the
securities sold short in an amount equal to the proceeds of the short sale
plus an additional margin amount established by the Board of Governors of the
Federal Reserve. If a fund engages in a short sale the collateral account
will be maintained by the fund's custodian. While the short sale is open, the
fund will maintain in a segregated custodial account an amount of securities
convertible into or exchangeable for such equivalent securities at no
additional cost. These securities would constitute the fund's long position.
A fund may make a short sale, as described above, when it wants to sell
the security it owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes and for purposes
of satisfying certain tests applicable to regulated investment companies
under the Internal Revenue Code. In such a case, any future losses in the
fund's long position should be reduced by a gain in the short position.
The extent to which such gains or losses are reduced would depend upon
the amount of the security sold short relative to the amount the fund owns.
There will be certain additional transaction costs associated with short
sales, but the fund will endeavor to offset these costs with income from the
investment of the cash proceeds of short sales.
PORTFOLIO TURNOVER
-----------------------------------------------------------------------------
FUNDS INVESTING IN EQUITY SECURITIES
With respect to each series of shares, the management will purchase and
sell securities without regard to the length of time the security has been
held and, accordingly, it can be expected that the rate of portfolio turnover
may be substantial. The management intends to purchase a given
7
<PAGE>
security whenever management believes it will contribute to the stated
objective of the series, even if the same security has only recently been
sold. The management will sell a given security, no matter for how long or
for how short a period it has been held in the portfolio, and no matter
whether the sale is at a gain or at a loss, if the management believes that
it is not fulfilling its purpose, either because, among other things, it did
not live up to management's expectations, or because it may be replaced with
another security holding greater promise, or because it has reached its
optimum potential, or because of a change in the circumstances of a
particular company 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 management may decrease or eliminate entirely its
equity position and increase its cash position, and when a rise in price
levels is anticipated, the management may increase its equity position and
decrease its cash. Since investment decisions are based on the anticipated
contribution of the security in question to the portfolio's objectives, the
rate of portfolio turnover is irrelevant when management believes a change is
in order to achieve those objectives, and the portfolio's annual portfolio
turnover rate cannot be anticipated and may be comparatively high. This
paragraph is a statement of fundamental policy and may be changed only by a
vote of the shareholders.
High portfolio turnover involves correspondingly greater transaction
costs, which each fund must pay.
FUNDS INVESTING IN FIXED INCOME SECURITIES
The decision to purchase or sell a security is based on the contribution
of the security to the objective of the series and upon income tax
considerations. The portfolio turnover rate is irrelevant to that decision.
The annual portfolio turnover rate cannot be anticipated and may be
comparatively high. The management has no intention of accomplishing any
particular rate of portfolio turnover, whether high or low, and the portfolio
turnover rates in the past should not be considered a representation of the
rates which will be attained in the future.
High portfolio turnover involves correspondingly greater transaction
costs, which each fund must pay.
PERFORMANCE ADVERTISING
-----------------------------------------------------------------------------
The following table sets forth the average annual total return of each
of the funds for the periods indicated. Average annual total return is
calculated by determining a fund's cumulative total return for the stated
period and then computing the annual compound return that would produce the
cumulative total return if the fund's performance had been constant over that
period. Cumulative total return includes all elements of return, including
reinvestment of dividends and capital gains distributions.
From
Inception
Year ended Five years ended through
Fund Dec. 31, 1995 Dec. 31, 1995 Dec. 31, 1995
- --------------------------------------------------------------------------------
TCI GROWTH --% --% --%
(11/20/87)(1)
TCI BALANCED --% -- --%
(5/1/91)(1)
TCI ADVANTAGE --% -- --%
(8/1/91)(1)
TCI INTERNATIONAL --% -- --%
(5/1/94)(1)
- --------------------------------------------------------------------------------
(1)Date of inception of Fund.
The funds may advertise average annual total return over periods of time
other than those periods shown in the foregoing table. The funds may also
advertise cumulative total return over various time periods.
8
<PAGE>
The following table shows the cumulative total return and the average
annual compound rate of return of the funds for the period indicated.
Average Annual
Cumulative Compound
Total Return Rate of Return
from inception from inception
Fund through Dec. 31, 1995 through Dec. 31, 1995
- --------------------------------------------------------------------------------
TCI GROWTH --% --%
TCI BALANCED --% --%
TCI ADVANTAGE --% --%
TCI INTERNATIONAL --% --%
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ADVERTISED BY TCI PORTFOLIOS SHOULD NOT BE USED FOR
COMPARATIVE PURPOSES BECAUSE SUCH FIGURES WILL NOT INCLUDE CHARGES AND
DEDUCTIONS IMPOSED BY THE INSURANCE COMPANY SEPARATE ACCOUNT UNDER THE
VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE CONTRACTS.
OFFICERS AND DIRECTORS
-----------------------------------------------------------------------------
The principal officers and the directors of the corporation, their
principal business experience during the past five years, and their
affiliations with Investors Research Corporation and its affiliated companies
are listed below. Unless otherwise noted, the business address of each
director and officer is 4500 Main Street, Kansas City, Missouri 64111. Those
directors who are "interested persons" as defined in the Investment Company
Act of 1940 are indicated by an asterisk (*).
JAMES E. STOWERS, JR.,* chairman, chief executive officer and director;
chairman, chief executive officer, director and controlling stockholder of
Twentieth Century Companies, Inc., parent corporation of Twentieth Century
Services, Inc., and Investors Research Corporation; chairman, chief executive
officer and director, Investors Research Corporation, Twentieth Century
Services, Inc., Twentieth Century Investors, Inc., Twentieth Century Premium
Reserves, Inc., Twentieth Century World Investors, Inc., Twentieth Century
Capital Portfolios, Inc., and Twentieth Century Strategic Portfolios, Inc.;
father of James E. Stowers III.
JAMES E. STOWERS III,* president and director; president and director,
Twentieth Century Companies, Inc., Investors Research Corporation, Twentieth
Century Services, Inc., Twentieth Century Investors, Inc., Twentieth Century
Premium Reserves, Inc., Twentieth Century World Investors, Inc., Twentieth
Century Capital Portfolios, Inc. and Twentieth Century Strategic Portfolios,
Inc.; son of James E. Stowers, Jr.
THOMAS A. BROWN, director; 2029 Wyandotte, Kansas City, Missouri; chief
executive officer, Associated Bearings Company, a corporation engaged in the
sale of bearings and power transmission products; director, Twentieth Century
Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century
World Investors, Inc., Twentieth Century Capital Portfolios, Inc. and
Twentieth Century Strategic Portfolios, Inc.
ROBERT W. DOERING, M.D., director; 6400 Prospect, Kansas City, Missouri;
general surgeon; director, Twentieth Century Investors, Inc., Twentieth
Century Premium Reserves, Inc., Twentieth Century World Investors, Inc.,
Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic
Portfolios, Inc.
LINSLEY L. LUNDGAARD, director; 18648 White Wing Drive, Rio Verde,
Arizona; retired; formerly vice president and national sales manager, Flour
Milling Division, Cargill, Inc.; director, Twentieth Century Investors, Inc.,
Twentieth Century Premium Reserves, Inc., Twentieth Century World Investors,
Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth Century
Strategic Portfolios, Inc.
DONALD H. PRATT, director; P.O. Box 419917, Kansas City, Missouri;
president, Butler Manufacturing Company; director, Twentieth Century
Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century
World Investors, Inc., Twentieth Century Capital Portfolios, Inc. and
Twentieth Century Strategic Portfolios, Inc.
LLOYD T. SILVER JR., director; 2300 West 70th Terrace, Mission Hills,
Kansas; president, LSC, Inc., manufacturer's representative; director,
9
<PAGE>
Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc.,
Twentieth Century World Investors, Inc., Twentieth Century Capital
Portfolios, Inc. and Twentieth Century Strategic Portfolios, Inc.
M. JEANNINE STRANDJORD, director; 908 West 121st Street, Kansas City,
Missouri; senior vice president and treasurer, Sprint Corporation; director,
Twentieth Century Investors, Inc., Twentieth Century Premium Reserves, Inc.,
Twentieth Century World Investors, Inc., Twentieth Century Capital
Portfolios, Inc. and Twentieth Century Strategic Portfolios, Inc.
JOHN M. URIE, director; 5511 N.W. Flint Ridge Road, Kansas City,
Missouri; consultant; director, Twentieth Century Investors, Inc., Twentieth
Century Premium Reserves, Inc., Twentieth Century World Investors, Inc.,
Twentieth Century Capital Portfolios, Inc. and Twentieth Century Strategic
Portfolios, Inc.
WILLIAM M. LYONS, executive vice president and general counsel;
executive vice president and general counsel, Twentieth Century Investors,
Inc., Twentieth Century Premium Reserves, Inc., Twentieth Century World
Investors, Inc., Twentieth Century Capital Portfolios, Inc. and Twentieth
Century Strategic Portfolios, Inc.; executive vice president and general
counsel, Twentieth Century Companies, Inc., Investors Research Corporation
and Twentieth Century Services, Inc.
ROBERT T. JACKSON, executive vice president- finance and principal
financial officer; treasurer, Twentieth Century Companies, Inc. and Investors
Research Corporation; executive vice president and treasurer, Twentieth
Century Services, Inc.; executive vice president-finance, Twentieth Century
Investors, Inc. and Twentieth Century Premium Reserves, Inc., Twentieth
Century World Investors, Inc. and Twentieth Century Strategic Portfolios,
Inc.; formerly executive vice president, Kemper Corporation.
MARYANNE ROEPKE, vice president and treasurer; vice president and
treasurer, Twentieth Century Investors, Inc., Twentieth Century Premium
Reserves, Inc., Twentieth Century World Investors, Inc., Twentieth Century
Capital Portfolios, Inc. and Twentieth Century Strategic Portfolios, Inc.;
vice president, Twentieth Century Services, Inc.
PATRICK A. LOOBY, vice president and secretary; vice president and
secretary, Twentieth Century Premium Reserves, Inc., Twentieth Century
Capital Portfolios, Inc. and Twentieth Century Strategic Portfolios, Inc.;
vice president, Twentieth Century Investors, Inc., Twentieth Century World
Investors, Inc. and Twentieth Century Services, Inc.
MERELE A. MAY, controller; controller, Twentieth Century Investors, Inc.
and Twentieth Century Capital Portfolios, Inc.
ROBERT J. LEACH, controller; controller, Twentieth Century World
Investors, Inc.
No director or principal officer owns shares of the corporation.
The directors of TCI Portfolios also serve as directors of Twentieth
Century Investors, Inc., Twentieth Century Premium Reserves, Inc., Twentieth
Century World Investors, Inc., Twentieth Century Capital Portfolios, Inc. and
Twentieth Century Strategic Portfolios, Inc., each a registered investment
company. Each director who is not an "interested person" as defined in the
Investment Company Act receives for service as members of the board of all
six of such companies an annual director's fee of $36,000 and an additional
fee of $1,000 per regular board meeting attended and $500 per special board
meeting and audit committee meeting attended. In addition, those directors
that are not "interested persons" who serve as chairman of a committee of the
board of directors receive an additional $2,000 for such services. These fees
and expenses are divided among the five investment companies based upon their
relative net assets.
Under the terms of the management agreement with Investors Research
Corporation, TCI Portfolios is responsible for paying such fees and expenses.
Set forth below is the aggregate compensation paid for the periods indicated
by the corporation and by the Twentieth Century family of
10
<PAGE>
mutual funds as a whole to each director of the corporation who is not an
"interested person" as defined in the Investment Company Act.
Aggregate Total Compensation from
Compensation the Twentieth Century
Director from the corporation1 Family of Funds2
- --------------------------------------------------------------------------------
Thomas A. Brown $2,142 $44,000
Robert W. Doering, M.D. 2,142 44,000
Linsley L. Lundgaard 2,142 44,000
Donald H. Pratt 1,558 32,000
Lloyd T. Silver Jr. 2,142 44,000
M. Jeannine Strandjord 2,142 44,000
John M. Urie 2,240 46,000
- --------------------------------------------------------------------------------
1 Includes compensation paid by the corporation for the fiscal year ended
December 31, 1995.
2 Includes compensation paid by the twelve investment company members of the
Twentieth Century family of funds for the calendar year ended December 31,
1995.
Those directors who are "interested persons," as defined in the
Investment Company Act, receive no fee as such for serving as a director. The
salaries of such individuals, who are also officers of TCI Portfolios, are
paid by Investors Research Corporation.
Messrs. Stowers Jr., Stowers III and Urie constitute the executive
committee of the board of directors. The committee performs the functions of
the board of directors between meetings of the board, subject to the
limitations on its powers set out in the Maryland Corporation Law and except
for matters required by the Investment Company Act to be acted upon by the
whole board.
Those directors who are not "interested persons" constitute the audit
committee. The functions of the audit committee include recommending the
engagement of the corporation's independent accountants, reviewing the
arrangements for the scope of the annual audit, reviewing comments made by
the independent accountants with respect to internal controls and the
considerations given or the corrective action taken by management, and
reviewing nonaudit services provided by the independent accountants.
The nominating committee has as its principal role the consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the board, management and shareholders. This
committee also reviews and makes recommendations to the board with respect to
the composition of board committees and other board-related matters,
including its organization, size, composition, responsibilities, functions
and compensation. The members of the nominating committee are Messrs. Urie
(chairman), Lundgaard and Stowers III.
MANAGEMENT
-----------------------------------------------------------------------------
A description of the responsibilities and method of compensation of TCI
Portfolios' investment manager, Investors Research Corporation, and its
controlling persons, appears in the prospectus under the caption
"Management."
During the past three fiscal years, the management fees of Investors
Research Corporation were as follows:
Year Ended December 31,
Fund 1995 1994 1993
- --------------------------------------------------------------------------------
TCI GROWTH
Management Fees $-- $8,825,656 $5,778,935
Average Net Assets $-- $882,565,600 $577,893,500
TCI BALANCED
Management Fees $-- $910,453 $580,663
Average Net Assets $-- $91,045,300 $58,066,300
TCI ADVANTAGE
Management Fees $-- $224,257 $188,349
Average Net Assets $-- $22,425,700 $18,834,900
TCI INTERNATIONAL
Management Fees $-- $101,344 --
Average Net Assets $-- $10,065,459 --
- --------------------------------------------------------------------------------
The management agreement shall continue as long as its continuance is
specifically approved at least annually by (i) the board of directors of TCI
Portfolios, or by the vote of a majority of the outstanding shares of TCI
Portfolios, and (ii) by the vote of a majority of the directors of TCI
Portfolios who are not parties to the agreement or interested persons of
Investors Research Corporation, cast in
11
<PAGE>
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 board of directors of TCI Portfolios, or by a
vote of a majority of TCI Portfolios' shareholders, on 60 days' written
notice to Investors Research Corporation, and it shall be automatically
terminated if it is assigned.
The management agreement provides that Investors Research Corporation
shall not be liable to TCI Portfolios or its shareholders for anything other
than willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations or duties.
The management agreement also provides that Investors Research
Corporation 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.
Twentieth Century Services, Inc. provides physical facilities, including
computer hardware and software and personnel, for the day-to-day
administration of TCI Portfolios and of Investors Research Corporation.
Investors Research Corporation pays Twentieth Century Services, Inc., for
such services.
CUSTODIAN
-----------------------------------------------------------------------------
Chase Manhattan Bank, N.A., 770 Broadway, New York, New York 10036 and
United Missouri Bank of Kansas City, N.A., 10th and Grand, Kansas City,
Missouri 64105, each serve as custodians 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.
AUDITORS
-----------------------------------------------------------------------------
TCI Portfolios' independent public accountants are Baird, Kurtz &
Dobson, City Center Square, Suite 2700, 1100 Main Street, Kansas City,
Missouri 64105. They will perform the annual audit of the corporation and
review the corporation's tax return. They also attend the meetings of and
perform services for the audit committee.
CAPITAL STOCK
-----------------------------------------------------------------------------
The five series of TCI Portfolios' capital stock are described in the
prospectus under the caption "Further Information About TCI Portfolios, Inc."
TCI Portfolios may issue one or more additional series of shares. The
assets belonging to each series of shares are held separately by the
custodian and the shares of each series represent a beneficial interest in
the principal, earnings and profit (or losses) of investments and other
assets held for each series. The rights of a shareholder of a particular
series are the same as the rights of a shareholder of all other series of
securities unless otherwise stated. Within their respective series, all
shares have equal redemption rights. Each share, when issued, is fully paid
and non-assessable. Each share, irrespective of series, is entitled to one
vote for each dollar of net asset value applicable to such share on all
questions.
In the event of complete liquidation or dissolution of TCI Portfolios,
shareholders of each series of shares shall be entitled to receive, pro rata,
all of the assets less the liabilities of that series.
As of December 31, 1995, in excess of 5% of the outstanding shares of
TCI Growth were owned of record as follows: Aetna Life Insurance and Annuity
Company, Hartford, Connecticut, owned 41.2%; Nationwide Life Insurance
Company, Columbus, Ohio, owned 38.6%; Mutual of America, New York, New York,
owned 8.2%; and Great-West Life and Annuity Company, Englewood, Colorado,
owned 5.1%.
As of December 31, 1995, 100% of the outstanding shares of TCI Advantage
were owned of record by Nationwide Life Insurance Company, Columbus, Ohio.
As of December 31, 1995, in excess of 5% of the outstanding shares of
TCI Balanced were owned of record as follows: Nationwide Life
12
<PAGE>
Insurance Company, Columbus, Ohio, owned 59.1%; Great- West Life and Annuity
Insurance Company, Englewood, Colorado, owned 26.1%; and UNUM Life Insurance
Company of America, Portland, Maine, owned 12.8%.
As of December 31, 1995, 97.8% of the outstanding shares of TCI
International were owned of record by Nationwide Life Insurance Company,
Columbus, Ohio.
All of such shares of the funds are held for the benefit of the holders
of variable life and variable annuity policies issued by such insurance
companies. Such shares are held in one or more accounts by entities
controlled by such insurance companies.
BROKERAGE
-----------------------------------------------------------------------------
Under the terms of the Management Agreement between TCI Portfolios and
Investors Research Corporation, Investors Research Corporation has the
responsibility for determining what securities shall be purchased and sold
and selecting the brokers or dealers to execute such transactions. TCI
Portfolios' policy is to execute orders on its portfolio transactions at the
most favorable prices available. So long as that policy is met, Investors
Research Corporation may take into consideration the factors indicated below
in selecting brokers or dealers.
EQUITY INVESTMENTS: Transactions in securities other than those for
which an exchange is the primary market may be done with dealers acting as
principal or market maker or with brokers. Transactions will be done on a
brokerage basis when Investors Research Corporation believes that the
facilities, expert personnel and technological systems of a broker enable TCI
Portfolios to secure as good a net price as it would have received from a
market maker. TCI Portfolios places most of its over-the-counter transactions
with market makers.
FIXED INCOME INVESTMENTS: Purchases are made directly from issuers,
underwriters, broker/ dealers or banks. In many transactions, the selection
of the broker/dealer is determined by the availability of the desired
security and its offering price. In other transactions, the selection is a
function of the selection of market and the negotiation of price, as well as
the broker/dealer's general execution, operational and financial capabilities
in the type of transaction involved.
Investors Research Corporation receives statistical and other
information and services (brokerage and research services) without cost from
broker/dealers. Investors Research Corporation evaluates such information and
services, together with all other information that it may have, in
supervising and managing the investment portfolios of TCI Portfolios. Because
such information and services may vary in amount, quality and reliability,
their influence in selecting brokers varies from none to very substantial.
Investors Research Corporation proposes to continue to place some of the TCI
Portfolios' brokerage business with one or more brokers who provide
information and services.
The brokerage and research services received by Investors Research
Corporation may be used with respect to one or more of TCI Portfolios' funds
and/or the other funds and accounts over which it has investment discretion,
and not all of such services may be used by Investors Research Corporation in
managing the portfolios of TCI Portfolios. Such information and services are
in addition to and not in lieu of the services required to be performed for
TCI Portfolios by Investors Research Corporation. Investors Research
Corporation does not utilize brokers that provide such information and
services for the purpose of reducing the expense of providing required
services to the TCI Portfolios.
The brokerage commissions paid by TCI Portfolios may exceed those that
another broker might have charged for effecting the same transaction because
of the value of the brokerage and/or research services provided. Factors
considered in such determinations are skill in execution of orders and the
quality of brokerage and research services received. Such services may
include: (i) advice, either directly or through publications or writings, as
to the value of securities, the advisability of purchasing or selling
securities, and the
13
<PAGE>
availability of securities or purchasers or sellers of securities; (ii)
analysis and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy, and the performance of accounts; or
(iii) execution of securities transactions and performance of functions
incidental thereto.
Evaluation of the overall reasonableness of brokerage commissions is
made by the manager and reviewed by the board of directors of TCI Portfolios.
In the years ended December 31, 1995, 1994 and 1993, TCI Portfolios paid
brokerage commissions of $_________, $2,875,685 and $1,732,769, respectively.
REDEMPTIONS IN KIND
-----------------------------------------------------------------------------
Shares will normally be redeemed for cash, although the corporation
retains the right to redeem its shares in kind under unusual circumstances,
such as an unusually large redemption, in order to protect the investments of
the remaining shareholders.
The securities delivered will be selected at the sole discretion of TCI
Portfolios, and will not necessarily be representative of the entire
portfolio, and will be securities that TCI Portfolios regards as least
desirable. The corporation has, however, elected to be governed by Rule 18f-1
under the Investment Company Act of 1940, pursuant to which the corporation
is obligated to redeem shares solely in cash up to the lesser of $250,000 or
1% of the net asset value of the corporation during any 90-day period for any
one shareholder. Should redemptions by any one contract owner exceed such
limitation, the corporation will have the option of redeeming the excess in
cash or in kind. If shares are redeemed in kind, the redeeming shareholder
might incur brokerage costs in converting the assets to cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method of valuing portfolio securities described in the prospectus under the
caption "How Share Price is Determined," and such valuation will be made as
of the same time the redemption price is determined.
HOLIDAYS
-----------------------------------------------------------------------------
TCI Portfolios does not determine the net asset value of its shares on
days when the New York Stock Exchange is closed. Currently, the Exchange is
closed on Saturdays, Sundays, and on holidays, namely New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
The financial statements of each outstanding series of TCI Portfolios
for the fiscal year ended December 31, 1995, are included in the annual
report to shareholders of that series. All such financial statements are
incorporated herein by reference. You may receive a copy of such financial
statements without charge upon request to TCI Portfolios at the address and
phone number shown on the cover of this statement of additional information.
With regard to TCI Growth, the TCI Growth prospectus and the TCI Growth
Annual Report to shareholders contain a Financial Highlights table. The table
found in the TCI Growth Annual Report indicates an inception date with regard
to the information presented for TCI Growth of October 19, 1987, while the
table included in the TCI Growth prospectus indicates an inception date of
November 20, 1987. October 19, 1987, represents the date that the investment
manager invested the original seed capital in TCI Growth. November 20, 1987,
represents the date that the registration statement registering shares of TCI
Growth became effective. The effective date of a registration statement is
the date that is required by federal securities regulations to be shown in a
prospectus financial highlights table as the date of inception of a series.
14
<PAGE>
TCI Portfolios, Inc.
Statement of
Additional Information
APRIL 1, 1996
[company logo]
TCI PORTFOLIOS, INC.
Part of the Twentieth Century
Family of Funds
- ------------------------------------------
P.O. Box 419385
- ------------------------------------------
Kansas City, Missouri
- ------------------------------------------
64141-6385
1-800-345-3533 or 816-531-5575
- ------------------------------------------
[company logo]
================================================================================
- --------------------------------------------------------------------------------
IN-BKT-4186
9604
(C) 1996 TWENTIETH CENTURY SERVICES, INC.
<PAGE>
PART C. OTHER INFORMATION.
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
(i) Financial Statements filed in Part A of the Registration
Statement:
1. Financial Highlights respecting shares of TCI Growth.
2. Financial Highlights respecting shares of TCI Balanced.
3. Financial Highlights respecting shares of TCI Advantage.
4. Financial Highlights respecting shares of TCI International.
(ii) Financial Statements filed in Part B of the Registration
Statement respecting shares of TCI Growth (each of the following
financial statements is contained in the Registrant's TCI Growth
Annual Report dated December 31, 1994, which appears as Exhibit
12.1 to this Registration Statement, and which is incorporated
by reference in Part B of this Registration Statement):
1. Statement of Assets and Liabilities at December 31, 1994.
2. Statement of Operations for the year ended December 31,
1994.
3. Statements of Changes in Net Assets for the years ended
December 31, 1994 and 1993.
4. Notes to Financial Statements as of December 31, 1994 and
1993.
5. Schedule of Investments at December 31, 1994.
6. Independent Accountants' Report dated January 20, 1995.
(iii) Financial Statements filed in Part B of the Registration
Statement respecting shares of TCI Balanced (each of the
following financial statements is contained in the Registrant's
TCI Balanced Annual Report dated December 31, 1994, which
appears as Exhibit 12.2 to this Registration Statement, and
which is incorporated by reference in Part B of this
Registration Statement):
1. Statement of Assets and Liabilities at December 31, 1994.
2. Statement of Operations for the year ended December 31,
1994.
3. Statements of Changes in Net Assets for the years ended
December 31, 1994 and 1993.
4. Notes to Financial Statements as of December 31, 1994 and
1993.
5. Schedule of Investments at December 31, 1994.
6. Independent Accountants' Report dated January 20, 1995.
(iv) Financial Statements filed in Part B of the Registration
Statement respecting shares of TCI Advantage (each of the
following financial statements is contained in the Registrant's
TCI Advantage Annual Report dated December 31, 1994, which
appears as Exhibit 12.3 to this Registration Statement, and
which is incorporated by reference in Part B of this
Registration Statement):
1. Statement of Assets and Liabilities at December 31, 1994.
2. Statement of Operations for the year ended December 31,
1994.
3. Statements of Changes in Net Assets for the years ended
December 31, 1994 and 1993.
4. Notes to Financial Statements as of December 31, 1994 and
1993.
5. Schedule of Investments at December 31, 1994.
6. Independent Accountants' Report dated January 20, 1995.
(v) Financial Statements filed in Part B of the Registration
Statement respecting shares of TCI International (each of the
following financial statements is contained in the Registrant's
TCI International Annual Report dated December 31, 1994, which
appears as Exhibit 12.4 to this Registration Statement, and is
incorporated by reference in Part B of this Registration
Statement):
1. Statement of Assets and Liabilities at December 31, 1994.
2. Statement of Operations for the seven months ended December
31, 1994.
3. Statement of Changes in Net Assets for the seven months
ended December 31, 1994 and 1993.
4. Notes to Financial Statements as of December 31, 1994 and
1993.
5. Schedule of Investments at December 31, 1994.
6. Independent Accountants' Report dated January 20, 1995.
(b) Exhibits.
1.1 Articles of Incorporation of TCI Portfolios, Inc. dated
June 3, 1987 (EX-99.B1.1).
1.2 Articles of Amendment of TCI Portfolios, Inc. dated July
22, 1988 (EX-99.B1.2).
1.3 Articles of Amendment of TCI Portfolios, Inc. dated August
11, 1993 (EX-99.B1.3).
2. Amended and Restated By-Laws of TCI Portfolios, Inc.
(EX-99.B2).
3. Voting Trust Agreements - None.
4. Specimen Securities - None.
5. Investment Management Agreement between TCI Portfolios,
Inc. and Investors Research Corporation dated August 1,
1994 (EX-99.B5).
6. Underwriting Agreements - None.
7. Bonus and Profit Sharing Plan, Etc. - None.
8.1. Custodian Agreement with United States Trust Company of New
York (filed as Exhibit 8 to Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A of the
Registrant, Commission File No. 33-14567, filed October 15,
1987, and incorporated herein by reference).
8.2. Custodian Agreement with United Missouri Bank, N.A.
(EX-99.B8.2).
9. Transfer Agency Agreement with Twentieth Century Services,
Inc. (formerly J.E. Stowers & Company) (filed as Exhibit 9
to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of the Registrant Commission File
No. 33-14567, filed October 15, 1987, and incorporated
herein by reference).
10. Opinion and Consent of David H. Reinmiller, Esq.
(EX-99.B10).
11. Consent of Baird, Kurtz & Dobson (EX-99.B11).
12.1 Annual Report of TCI Growth for the year ended December 31,
1994 (filed filed as Exhibit 12.1 to Post-Effective
Amendment No. 16 to the Registration Statement on Form N-1A
of the Registrant, Commission File No. 33- 14567, filed
April 7, 1995, and incorporated herein by reference).
12.2 Annual Report of TCI Balanced for the year ended December
31, 1994 (filed as Exhibit 12.2 to Post-Effective Amendment
No. 16 to the Registration Statement on Form N-1A of the
Registrant, Commission File No. 33-14567, filed April 7,
1995, and incorporated herein by reference).
12.3 Annual Report of TCI Advantage for the year ended December
31, 1994 (filed as Exhibit 12.3 to Post-Effective Amendment
No. 16 to the Registration Statement on Form N-1A of the
Registrant, Commission File No. 33-14567, filed April 7,
1995, and incorporated herein by reference).
12.4 Annual Report of TCI International for the seven months
ended December 31, 1994 (filed as Exhibit 12.4 to
Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A of the Registrant, Commission File
No. 33-14567, filed April 7, 1995, and incorporated herein
by reference).
13. Agreements for Initial Capital, Etc. - None.
14. Model Retirement Plans - None.
15. 12b-1 Plans - None.
16. Schedule of Computation for Performance Advertising
Quotations (EX-99.B16).
17. Power of Attorney (EX-24).
ITEM 25. Persons Controlled by or Under Common Control with Registrant - None.
ITEM 26. Number of Holders of Securities.
Number of Record Holders
Title of Series as of December 31, 1995
--------------- -----------------------
TCI Growth 21
TCI Balanced 9
TCI Advantage 3
TCI International 5
TCI Value 0
ITEM 27. Indemnification.
The Registrant is a Maryland corporation. Section 2- 418 of the
Maryland General Corporation Law allows a Maryland corporation to
indemnify its officers, directors, employees and agents to the extent
provided in such statute.
Article XIII of the Registrant's Amended Articles of Incorporation,
Exhibits 1(a) and 1(b), requires the indemnification of the
Registrant's directors and officers to the extent permitted by
Section 2-418 of the Maryland General Corporation Law, the Investment
Company Act of 1940 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. The current
policy is for a one year term expiring March 23, 1995.
ITEM 28. Business and Other Connections of Investment Advisor.
Investors Research Corporation, the investment advisor, is engaged in
the business of managing investments for registered investment
companies, deferred compensation plans and other institutional
investors.
ITEM 29. Principal Underwriters - None.
ITEM 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder,
are in the possession of Registrant, Twentieth Century Services, Inc.
and Investors Research Corporation, all located at 4500 Main Street,
Kansas City, Missouri 64111.
ITEM 31. Management Services - None.
ITEM 32. Undertakings.
(a) Not applicable.
(b) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement, using financial
statements which need not be certified, within four to six
months from the effective date of this Post-Effective
Amendment No. 17.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes that it will, if requested
to do so by the holders of at least 10% of the Registrant's
outstanding votes, call a meeting of shareholders for the
purpose of voting upon the question of the removal of a
director and to assist in communication with other
shareholders as required by Section 16(C).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, TCI Portfolios, Inc., the Registrant, has duly
caused this Post-Effective Amendment No. 17 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Kansas City, State of Missouri on the 15th day of January, 1996.
TCI Portfolios, Inc.
(Registrant)
By:/s/ James E. Stowers III
James E. Stowers III, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 17 has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
*James E. Stowers, Jr. Chairman, Director and January 15, 1996
James E. Stowers, Jr. Principal Executive Officer
/s/ James E. Stowers III President and Director January 15, 1996
James E. Stowers III
/s/ Robert T. Jackson Executive Vice President January 15, 1996
Robert T. Jackson and Principal Financial Officer
*Maryanne Roepke Vice President, Treasurer and January 15, 1996
Maryanne Roepke Principal Accounting Officer
*Thomas A. Brown Director January 15, 1996
Thomas A. Brown
*Robert W. Doering, M.D. Director January 15, 1996
Robert W. Doering, M.D.
*Linsley L. Lundgaard Director January 15, 1996
Linsley L. Lundgaard
*Donald H. Pratt Director January 15, 1996
Donald H. Pratt
*Lloyd T. Silver, Jr. Director January 15, 1996
Lloyd T. Silver, Jr.
*M. Jeannine Strandjord Director January 15, 1996
M. Jeannine Strandjord
*John M. Urie Director January 15, 1996
John M. Urie
*By/s/ James E. Stowers III
James E. Stowers III
Attorney-in-Fact
EXHIBIT INDEX
Exhibit Description of Document
Number
EX-99.B1.1 Articles of Incorporation of TCI Portfolios, Inc.
EX-99.B1.2 Articles of Amendment of TCI Portfolios, Inc., dated July 22, 1988.
EX-99.B1.3 Articles of Amendment of TCI Portfolios, Inc., dated August 10,
1993.
EX-99.B2 Amended and Restated By-Laws of TCI Portfolios, Inc.
EX-99.B5 Investment Management Agreement with Investors Research Corporation
EX-99.B8.2 Custodian Agreement with United Missouri Bank, N.A.
EX-99.B10 Opinion and Consent of David H. Reinmiller, Esq.
EX-99.B11 Consent of Baird, Kurtz & Dobson
EX-99.B16 Schedule of Computation for Performance Advertising Quotations
EX-99.B24 Power of Attorney.
ARTICLES OF INCORPORATION
OF
TCI PORTFOLIOS, INC.
FIRST: I, the undersigned, Irving Kuraner, whose post office address is
605 West 47th Street, P.O. Box 418210, Kansas City, Missouri 64141-9210, being
at least 18 years of age, do, under and by virtue of the general laws of the
State of Maryland, execute and acknowledge these Articles of Incorporation as
incorporator with the intention of forming a corporation.
SECOND: The name of the corporation is TCI Portfolios, Inc.
THIRD: The purposes for which the corporation is formed are:
1. To carry on the business of an investment company.
2. To engage in any or all lawful business for which
corporations may be organized under the Maryland General Corporation Law except
insofar as such business may be limited by the Investment Company Act of 1940 as
from time to time amended, or by any other law of the United States regulating
investment companies, or by limitations imposed by the laws of the several
states wherein the corporation offers its shares.
FOURTH: The name of the resident agent of the corporation in this state
is The Corporation Trust Incorporated, a corporation of this state, and the post
office address of the resident agent is 32 South Street, Baltimore, Maryland
21202. The principal office is the same as the resident agent.
FIFTH:
1. The total number of shares of stock which the Corporation
shall have authority to issue is One Hundred Million (100,000,000) shares of a
par value of $1.00 each, to be divided into such classes as the Board of
Directors may from time to time determine. The Board of Directors shall have the
power to fix the number of shares in each such classes and to fix such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption thereof as are not stated in these Articles of Incorporation.
2. The preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof shall be as follows:
(a) The holder of each share of stock of the Corporation
shall be entitled to one vote for each share of stock, irrespective of the
class, then standing in his name on the books of the Corporation; provided,
however, that (1) matters affecting only one class shall be voted upon only by
that class, and (2) where required by the Investment Company Act of 1940 or the
regulations adopted thereunder or any other applicable law, certain matters
shall be voted on separately by each class of shares affected.
(b) All payments received by the Corporation for the sale
of stock of each class and the investment and reinvestment thereof, and the
income, earnings and profits thereon shall belong to the class of shares with
respect to which such payments were received, and are herein referred to as
"assets belonging to" such class.
(c) The holders of the outstanding shares of each class of
capital stock of the Corporation shall be entitled to receive dividends from
ordinary income and distributions from capital gains of the assets belonging to
such class in such amounts, if any, and payable in such manner, as the Board of
Directors may from time to time determine.
(d) In the event of the liquidation or dissolution of the
Corporation, shareholders of each class shall be entitled to receive the assets
belonging to such class to be distributed among them in proportion to the number
of shares of such class held by them. If there are any assets not belonging to
any particular class of stock and available for distribution, such assets shall
be allocated to each class in proportion to the net asset value of the
respective classes.
(e) Each holder of any class of stock of the Corporation,
upon proper documentation and the payment of all taxes in connection therewith,
may require the Corporation to redeem or repurchase such stock at the net asset
value thereof, less a redemption charge or discount determined by the Board of
Directors. Payment shall be made in cash or in kind as determined by the
Corporation.
(f) Each holder of any class of stock of the Corporation
may, upon proper documentation and the payment of all taxes in connection
therewith, convert the shares represented thereby into shares of stock of any
other class of the Corporation on the basis of their relative net asset values
less a conversion charge or discount determined by the Board of Directors.
(g) The Corporation may cause the shares of any stockholder
to be redeemed pursuant to rules of general application consistently applied
whenever the number of shares owned by such stockholder is below a minimum fixed
by the Board of Directors.
SIXTH: The number of directors of the Corporation shall be 7, which
number may be changed in accordance with the by-laws of the Corporation but
shall never be less than 3. The names of the directors who shall act until the
first annual meeting and until their successors are elected and qualify:
Thomas A. Brown
Robert W. Doering, M.D.
Irving Kuraner
Linsley L. Lundgaard
Lloyd T. Silver, Jr.
James E. Stowers
John M. Urie
SEVENTH: The following provisions are hereby adopted for the purpose
of defining, limiting and regulating the powers of the corporation, its
directors and stockholders:
1. The Board of Directors has exclusive authority to make,
amend, and repeal the By-laws of the Corporation.
2. Subject to the terms of Article Fifth hereof the Board of
Directors of the Corporation is hereby empowered to authorize the issuance from
time to time of shares of its stock of any class, whether now or hereafter
authorized, or securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized.
3. The Board of Directors may classify or reclassify any
unissued stock from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of the stock.
4. No holder of shares of stock of any class shall be entitled
as a matter of right to subscribe for or purchase or receive any part of any new
or additional issue of shares of stock of any class or of securities convertible
into shares of stock of any class, whether now or hereafter authorized or
whether issued for money, for a consideration other than money, or by way of
dividend.
5. Notwithstanding any provisions of law requiring a greater
proportion than a majority of the votes of all classes or of any class of stock
entitled to be cast to take or authorize any action, the Corporation may take or
authorize such action upon the concurrence of a majority of the aggregate number
of the votes entitled to be cast thereon.
6. The Corporation reserves the right from time to time to
make any amendments of its charter, now or hereafter authorized by law,
including any amendment which alters the contract rights, as expressly set forth
in its charter, of any outstanding stock.
EIGHTH: The Corporation shall indemnify to the full extent permitted by
law each person who has served at any time as director or officer of the
Corporation, and his heirs, administrators, successors and assigns, against any
and all reasonable expenses, including counsel fees, amounts paid upon
judgments, and amounts paid in settlement (before or after suit is commenced)
actually incurred by such person in connection with the defense or settlement of
any claim, action, suit or proceeding in which he is made a party, or which may
be asserted against him, by reason of being or having been a director of officer
of the Corporation. Such indemnification shall be in addition to any other
rights to which such person may be entitled under any law, bylaw, agreement,
vote of stockholders, or otherwise.
IN WITNESS WHEREOF, the undersigned who executed the foregoing Articles
of Incorporation, hereby acknowledges the same to be his act and states, that to
the best of his knowledge, information and belief, the matters and facts therein
are true in all material respects, and that this statement is made under
penalties of perjury.
Dated this 3rd day of June, 1987.
/s/ Irving Kuraner
Irving Kuraner
ARTICLES OF AMENDMENT
OF
TCI PORTFOLIOS, INC.
The undersigned, Irving Kuraner, does hereby certify that:
1. He is the duly appointed Executive Vice-President of TCI Portfolios,
Inc., a Maryland corporation (the "Corporation").
2. The amendment to the Articles of Incorporation of the Corporation
which is set forth in paragraph 3 below was unanimously approved by resolution
of the Board of Directors of the Corporation at a meeting held on May 23, 1988,
and it was recommended that such amendment be presented for a vote of the
stockholders of the Corporation. The stockholders of the Corporation approved
the adoption of the amendment as required by the General Corporation Law of the
State of Maryland and the Corporation's Articles of Incorporation at a meeting
held on July 21, 1988.
3. A new Article Ninth shall be added to the Corporation's Articles of
Incorporation to read as follows:
NINTH: An officer or director of the Corporation shall have no personal
liability to the Corporation or to its stockholders for monetary
damages as an officer or director except to the extent that Section
2-405.2 (or any successor provision) of the General Corporation Law of
the State of Maryland, as amended from time to time, expressly provides
that the liability of an officer or director may not be limited;
provided, however, that nothing herein shall protect or purport to
protect any director or officer of the Corporation against any
liability to the Corporation or to its stockholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
IN WITNESS WHEREOF, the undersigned hereby acknowledges that this
Articles of Amendment is the act of TCI Portfolios, Inc. and states, that to the
best of his knowledge, information and belief, the matters and fact stated
therein are true in all material respects, and that this statement is made under
penalties of perjury.
Dated this 22nd day of July, 1988.
\s\ Irving Kuraner
Irving Kuraner
Executive Vice-President
Witness:
/s/ William M. Lyons
William M. Lyons
Secretary
ARTICLE OF AMENDMENT
OF
TCI PORTFOLIOS, INC.
The undersigned, Patrick A. Looby, does hereby certify that:
1. He is the duly elected Vice-President of TCI Portfolios, Inc., a
Maryland corporation (the "Corporation").
2. The amendment to the Articles of Incorporation of the Corporation
set forth below, by resolution unanimously adopted by the Board of Directors of
the Corporation at a meeting held on May 8, 1993, was deemed advisable and
directed to be presented for a vote of the stockholders of the Corporation. The
stockholders of the Corporation, at a meeting held on July 28, 1993, approved
the adoption of the amendment as required by the General Corporation Law of the
State of Maryland and the Corporation's Articles of Incorporation.
3. The amendment of the Articles of Incorporation proposed by the Board
of Directors and adopted by the stockholders of the Corporation is as follows:
RESOLVED, that the Articles of Incorporation of TCI Portfolios, Inc., a
Maryland corporation, be, and they hereby are, amended by deleting all
of paragraphs 1 and 2(a) of the present Article FIFTH thereof and by
inserting in lieu thereof the following new paragraphs 1 and 2(a) of
Articles FIFTH, providing in their entirety as follows (all remaining
paragraphs of Article FIFTH being unchanged hereby):
FIFTH.
1. The total number of shares of stock which the Corporation shall have
authority to issue is Three Hundred Million (300,000,000) shares of a
par value of $0.01 each, to be divided into such classes as the Board
of Directors may from time to time determine. The Board of Directors
shall have the power to fix the number of shares in each such classes
and to fix such preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof as are not stated in these Articles of
Incorporation.
2. The preferences, conversion or other rights, voting powers,
restrictions, limitation as to dividends, qualifications and terms or
conditions of redemption thereof shall be as follows:
(a) Holders of shares of stock of the Corporation shall be entitled to
one vote for each dollar of net asset value per share for each share of
stock held, irrespective of the class; provided, however, that (1)
matters affecting only one class shall be voted upon only by that
class, and (2) where required by the Investment Company Act of 1940 or
the regulations adopted thereunder or any other applicable law, certain
matters shall be voted on separately by each class of shares affected.
IN WITNESS WHEREOF, the undersigned hereby acknowledges that this
Articles of Amendment is the act of TCI Portfolios, Inc. and states, that to the
best of his knowledge, information and belief, the matters and fact stated
therein are true in all material respects, and that this statement is made under
penalties of perjury.
Dated this 10th day of August, 1993.
/s/ Patrick A. Looby
Patrick A. Looby
Vice President
Witness:
/s/ John H. Hartenbach
John H. Hartenbach
Assistant Secretary
TCI PORTFOLIOS, INC.
AMENDED AND RESTATED BY-LAWS
OFFICES
Section 1. The registered office shall be in the City of Baltimore,
State of Maryland.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Maryland as the business of the Corporation
may require.
MEETINGS OF STOCKHOLDERS
Section 3. Meetings of the stockholders shall be held at the office of
the Corporation in Kansas City, Missouri or at any other place within the United
States as shall be designated from time to time by the Board of Directors and
stated in the notice of meeting.
Section 4. The Corporation shall not be required to hold an annual
meeting of its stockholders in any year in which the election of Directors is
not required by the Investment Company Act of 1940, as amended (the "Investment
Company Act"), to be acted upon by the holders of any class or series of stock
of the Corporation. The use of the term "annual meeting," wherever found in
these By-laws, shall not be construed to imply a requirement that a stockholder
meeting be held annually. In the event that the Corporation shall be required by
the Investment Company Act to hold an annual meeting of stockholders to elect
Directors, such meeting shall be held at a date and time set by the Board of
Directors in accordance with the Investment Company Act (but in no event later
than 120 days after the occurrence of the event requiring the election of
Directors). Any annual meeting that is not required by the Investment Company
Act shall be held on a date and time during the month of July set by the Board
of Directors. At any annual meeting, the stockholders shall elect a Board of
Directors and may transact any business within the powers of the Corporation.
Any business of the Corporation may be transacted at an annual meeting without
being specially designated in the notice, except such business as is
specifically required by statute to be stated in the notice.
Section 5. A majority of the stock issued and outstanding and entitled to
vote at any meeting of stockholders, the holders of which are present in person
or represented by proxy, shall constitute a quorum for the transaction of
business, except as otherwise provided by law, by the Articles of Incorporation,
or by these By-laws. Where the approval of any particular item of business to
come before a meeting requires the approval of one or more than one class or
series of stock, voting separately, the holders of a majority of each of such
classes or series of stock entitled to vote must be present to constitute a
quorum for the transaction of such item of business. If, however, a quorum shall
not be present or represented at any meeting of the stockholders, a majority of
the voting stock represented in person or by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than 90 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote thereat.
Section 6. When a quorum is present at any meeting, a majority of all the
votes cast is sufficient to approve any matter which properly comes before the
meeting, unless a different vote for such matter is specified by law, by the
Articles of Incorporation or by these By-laws, in which case such different
specified vote shall be required to approve such matter.
Section 7. Special meetings of the stockholders may be called at any time
by the Board of Directors, or by the Chairman of the Board, the President, a
Vice President, the Secretary or an Assistant Secretary.
Section 8. Special meetings of the stockholders shall be called by the
Secretary upon written request of stockholders entitled to cast at least 25
percent of all the votes entitled to be cast at such meeting. Such request shall
state the purpose or purposes of such meeting and the matters proposed to be
acted on thereat. After verification of the sufficiency of such request, the
Secretary shall then inform the requesting stockholders of the reasonably
estimated cost of preparing and mailing such notice of the meeting. Upon payment
to the Corporation of such costs the Secretary shall give notice stating the
purpose or purposes of the meeting to all stockholders entitled to notice of
such meeting; provided, however, unless requested by stockholders entitled to
cast a majority of all the votes entitled to be cast at the meeting, no special
meeting need be called to consider any matter which is substantially the same as
a matter voted upon at any special meeting of the stockholders held during the
preceding 12 months.
Section 9. Not less than ten nor more than 90 days before the date of
every stockholders' meeting, the Secretary shall give to each stockholder
entitled to vote at such meeting, and to each stockholder not entitled to vote
who is entitled by statute to notice, written or printed notice stating (i) the
time and place of the meeting and, (ii) the purpose or purposes for which the
meeting is called if the meeting is a special meeting, or if notice of the
purpose of the meeting is required by statute to be given. Such notice shall be
given either by mail or by presenting it to the stockholder personally or by
leaving it at his residence or usual place of business. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 10. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice of the meeting.
Section 11. At all meetings of stockholders, a stockholder may vote the
shares owned of record by him on the record date (determined in accordance with
Section 39 hereof) for each such stockholders' meeting either in person or by
written proxy signed by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after 11 months from its date, unless
otherwise provided in the proxy. At all meetings of stockholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting.
DIRECTORS
Section 12. The number of Directors of the Corporation shall be seven. By
vote of a majority of the entire Board of Directors, the number of Directors
fixed by the Articles of Incorporation or by these By-laws may be increased or
decreased from time to time to a number not exceeding 15 nor less than three,
but the tenure of office of a Director shall not be affected by any decrease in
the number of Directors so made by the Board. Until the first annual meeting of
stockholders or until successors are duly elected and qualify, the Board shall
consist of the persons named as such in the Articles of Incorporation. At the
first annual meeting of stockholders and at each annual meeting thereafter, the
stockholders shall elect Directors to hold office until the next annual meeting
or until their successors are elected and qualify. A plurality of all the votes
cast at an annual meeting at which a quorum is present shall be required to
elect Directors of the Corporation. Each Director, upon his election, shall
qualify by accepting the Office of Director, and his attendance at, or his
written approval of the minutes of, any meeting of the newly-elected directors
shall constitute his acceptance of such office, or he may execute such
acceptance by a separate writing, which shall be placed in the minute book.
Directors need not be stockholders of the Corporation.
Section 13. The business and affairs of the Corporation shall be managed
by its Board of Directors, which may exercise all the powers of the Corporation,
except such as are by law and by the Articles of Incorporation or by these
By-laws conferred upon or reserved to the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 14. Meetings of the Board of Directors, regular or special, may
be held at any place in or out of the State of Maryland as the Board may from
time to time determine.
Section 15. The first meeting of each newly-elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly-elected Directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly-elected
Board of Directors, or if such meeting is not held at the time and place so
fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the Directors.
Section 16. Regular meetings of the Board of Directors may be held at
such time and place as shall from time to time be fixed by resolution adopted by
the full Board of Directors. Adoption of such resolution shall constitute notice
of all meetings held pursuant thereto.
Section 17. Special meetings of the Board of Directors may be called at
any time by the Board of Directors or the Executive Committee, if one be
constituted, by vote at a meeting, or by the Chairman of the Board, the
President or by a majority of the Directors or a majority of the members of the
Executive Committee in writing with or without a meeting. Special meetings may
be held at such place or places within or without Maryland as may be designated
from time to time by the Board of Directors; in the absence of such designation,
such meetings shall be held at such places as may be designated in the call.
Section 18. Notice of the place and time of every special meeting of the
Board of Directors shall be served on each Director or sent to him by telegraph,
or by leaving the same at his residence or usual place of business at least
three days before the date of the meeting, or by mail at least seven days before
the date of the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the Director at his address as
it appears on the records of the Corporation, with postage thereon prepaid.
Section 19. At all meetings of the Board a majority of the entire Board
of Directors shall constitute a quorum for the transaction of business and the
action of a majority of the Directors present at any meeting at which a quorum
is present shall be the action of the Board of Directors unless the concurrence
of a greater proportion is required for such action by law, the Articles of
Incorporation or these By-laws. If a quorum shall not be present at any meeting
of Directors, the Directors present thereat may by a majority vote adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 20. Unless otherwise restricted by the Articles of Incorporation
or these By-laws, members of the Board of Directors of the Corporation, or any
committee designated by the Board, may participate in a meeting of the Board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by that means shall constitute presence in person
at such meeting.
Section 21. Any action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be taken without a
meeting, if a written consent to such action is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of the proceedings of the Board or committee.
COMMITTEES OF DIRECTORS
Section 22. The Board of Directors may appoint from among its members an
Executive Committee and other committees composed of two or more Directors, and
may delegate to such committees any of the powers of the Board of Directors
except the power to declare dividends or distributions on stock, recommend to
the stockholders any action which requires stockholder approval, amend the
By-laws, approve any merger or share exchange which does not require stockholder
approval or issue stock. However, if the Board of Directors, subject to the
terms and provisions of the Articles of Incorporation, has given general
authorization for the issuance of stock, a committee of the Board, in accordance
with a general formula or method specified by the Board of Directors by
resolution or by adoption of a stock option or other plan, may fix the terms of
stock subject to classification or reclassification and the terms on which any
stock may be issued. In the absence of an appropriate resolution of the Board of
Directors, each committee may adopt such rules and regulations governing its
duties, proceedings, quorum and manner of acting as it shall deem proper and
desirable, provided that the quorum shall not be less than two Directors. In the
absence of any member of such committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a member of the
Board of Directors to act in the place of such absent member.
Section 23. All committees of the Board of Directors shall keep minutes
of their proceedings and shall report the same to the Board of Directors at the
next Board of Directors meeting. Any action by any of such committees shall be
subject to the revision and alteration by the Board of Directors, provided that
no rights of the third persons shall be affected by any such revision or
alteration.
WAIVER OF NOTICE
Section 24. Whenever any notice of the time, place or purpose of any
meeting of stockholders, Directors or committee is required to be given under
the provisions of a statute or under the provisions of the Articles of
Incorporation or these By-laws, each person who is entitled to the notice waives
notices if (i) he, before or after the meeting, signs a waiver of notice which
is filed with the records of the meeting, or (ii) such person is present in
person at the meeting if the meeting in question is of the Board of Directors or
a committee or, if the meeting in question is of the stockholders, if such
person is present either in person or by proxy.
OFFICERS
Section 25. The officers of the Corporation shall be chosen by the Board
of Directors and shall include a President, a Vice President, a Secretary and a
Treasurer. The President shall be selected from among the Directors. The Board
of Directors may also choose a Chairman of the Board, additional Vice
Presidents, one or more Assistant Secretaries and Assistant Treasurers. If
chosen, the Chairman of the Board shall be selected from among the Directors.
Except as otherwise specified in these By-laws, officers of the Corporation need
not be members of the Board of Directors. Officers of the Corporation shall be
elected by the Board of Directors at its first meeting after each annual meeting
of stockholders. If no annual meeting of stockholders shall be held in any year,
such election of officers may be held at any regular or special meeting of the
Board of Directors as shall be determined by the Board of Directors.
Section 26. Two or more offices, except those of President and Vice
President, may be held by the same person but no officer shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law, the Articles of Incorporation or these By-laws to
be executed, acknowledged or verified by two or more officers.
Section 27. The Board of Directors, at any meeting thereof, may appoint
such additional officers and agents as it shall deem necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
Section 28. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 29. The officers of the Corporation shall serve for one year and
until their successors are chosen and qualify. Any officer or agent may be
removed by the Board of Directors whenever, in its judgment, the best interests
of the Corporation will be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed. If the
office of any officer or officers becomes vacant for any reason, the vacancy may
be filled by the Board of Directors at any meeting thereof.
CHAIRMAN OF THE BOARD
Section 30. If a Chairman of the Board be elected, he shall preside at
all meetings of the stockholders and Directors at which he may be present and
shall have such other duties, powers and authority as may be prescribed
elsewhere in these By-laws. The Board of Directors may delegate such other
authority and assign such additional duties to the Chairman of the Board, other
than those conferred by law exclusively upon the President, as it may from time
to time determine, and, to the extent permissible by law, the Board may
designate the Chairman of the Board as the chief executive officer of the
Corporation with all of the powers otherwise conferred upon the President of the
Corporation under Section 31, or it may, from time to time, divide the
responsibilities, duties and authority for the general control and management of
the Corporation's business and affairs between the Chairman of the Board and the
President.
PRESIDENT
Section 31. Unless the Board otherwise provides, the President shall be
the chief executive officer of the Corporation with such general executive
powers and duties of supervision and management as are usually vested in the
office of the chief executive officer of a corporation, and he shall carry into
effect all directions and resolutions of the Board. The President, in the
absence of the Chairman of the Board or if there be no Chairman of the Board,
shall preside at all meetings of the stockholders and Directors. He shall have
such other or further duties and authority as may be prescribed elsewhere in
these By-laws or from time to time by the Board of Directors. If a Chairman of
the Board be elected or appointed and designated as the chief executive officer
of the Corporation, as provided in Section 30, the President shall perform such
duties as may be specifically delegated to him by the Board of Directors or are
conferred by law exclusively upon him and in the absence, disability, or
inability or refusal to act of the Chairman of the Board, the President shall
perform the duties and exercise the powers of the Chairman of the Board.
VICE PRESIDENTS
Section 32. The Vice President, or if there shall be more than one, the
Vice Presidents in the order determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President, and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
SECRETARY AND ASSISTANT SECRETARIES
Section 33. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or the
chief executive officer, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an Assistant Secretary.
Section 34. The Assistant Secretary, if any, or if there be more than
one, the Assistant Secretaries in the order determined by the Board of
Directors, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
THE TREASURER AND ASSISTANT TREASURER
Section 35. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipt and
disbursements in books belonging to the Corporation and shall deposit all
monies, and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
Section 36. The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the chief executive officer and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. He shall perform all of the acts incidental to the office of
Treasurer, subject to the control of the Board of Directors.
Section 37. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board for the faithful performance of the duties of
his office and for the restoration of the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
Section 38. The Assistant Treasurer, if any, or if there shall be more
than one, the Assistant Treasurers in the order determined by the Board of
Directors, or if there be no such determination, the Assistant Treasurer
designated by the Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
GENERAL PROVISIONS
CLOSING OF TRANSFER BOOKS
Section 39. The Board of Directors may fix, in advance, a date as the
record date for the purpose of determining stockholders entitled to notice of,
or to vote at, any meeting of stockholders, or stockholders entitled to receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of stockholders of record for any other proper purpose. Such date,
in any case, shall be not more than 90 days, and in case of a meeting of
stockholders not less than ten days, prior to the date on which the particular
action requiring such determination of stockholders is to be taken. In lieu of
fixing a record date, prior to the date on which the particular action requiring
such determination of stockholders is to be taken, the Board of Directors may
provide that the stock transfer books shall be closed for a stated period not to
exceed, in any case, 20 days. If the stock transfer books are closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten days
immediately preceding such meeting.
Section 40. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
shares or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Maryland.
DIVIDENDS
Section 41. Dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting. Dividends
may be paid in cash, in property, or in its own shares. The authority of the
Board of Directors regarding the declaration and payment of dividends is
subject, however, to the provisions of the Investment Company Act, the law of
Maryland and the Articles of Incorporation.
EXECUTION OF INSTRUMENTS
Section 42. All documents, transfers, contracts, agreements, requisitions
or orders, promissory notes, assignments, endorsements, checks, drafts, and
orders for payment of money, notes and other evidences of indebtedness, issued
in the name of the Corporation, and other instruments requiring execution by the
Corporation, shall be signed by such officer or officers as the Board of
Directors may from time to time designate or, in the absence of such
designation, by the chief executive officer.
FISCAL YEAR
Section 43. The fiscal year of the Corporation shall end on December 1 of
each year unless the Board of Directors shall determine otherwise.
SEAL
Section 44. The corporate seal of the Corporation shall have inscribed
thereon the name and the state of incorporation of the Corporation. The form of
the seal shall be subject to alteration by the Board of Directors and the seal
may be used by causing it or a facsimile to be impressed or affixed or printed
or otherwise reproduced. In lieu of affixing the corporate seal to any document
it shall be sufficient to meet the requirements of any law, rule, or regulation
relating to a corporate seal to affix the word "(Seal)" adjacent to the
signature of the authorized officer of the Corporation.
STOCK LEDGER
Section 45. The Corporation shall maintain at its office in Kansas City,
Missouri, an original stock ledger containing the names and addresses of all
stockholders and the number of shares of each class held by each stockholder.
Such stock ledger may be in written form or any other form capable of being
converted into written form within a reasonable time for visual inspection.
STOCK CERTIFICATES
Section 46. Certificates of stock of the Corporation shall be in the form
approved by the Board of Directors. Subject to Section 47 below, every holder of
stock of the Corporation shall be entitled to have a certificate, signed in the
name of the Corporation by the President, or any Vice President and
countersigned by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, certifying the number and kind of shares owned by him in
the Corporation. Such certificate may be sealed with the corporate seal of the
Corporation. Such signatures may be either manual or facsimile signatures and
the seal may be either facsimile or any other form of seal. In case any officer,
transfer agent, or registrar who shall have signed any such certificate, or
whose facsimile signature has been placed thereon, shall cease to be such an
officer, transfer agent or registrar (because of death, resignation or
otherwise) before such certificate is issued, such certificate may be issued and
delivered by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Section 47. The Board of Directors, by resolution, may at any time
authorize the issuance without certificates of some or all of the shares of one
or more of the classes or series of the Corporation's stock. Such issuances
without certificates shall be made in accordance with the requirements therefor
set forth in Sections 2-210(c) and 2-211 of the Maryland General Corporation Law
and Article 8 of the Maryland Commercial Law Article (or any successor
provisions to such statutes). Such authorization will not affect shares already
represented by certificates until such shares are surrendered to the Corporation
for transfer, cancellation or other disposition.
INDEMNIFICATION AND INSURANCE
Section 48. (a) The Corporation shall indemnify any individual
("Indemnitee") who is a present or former director, officer, employee, or agent
of the Corporation, or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan who, by reason of his position was, is, or is threatened to be made
a party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative (hereinafter
collectively referred to as a "Proceeding") against any judgments, penalties,
fines, settlements, and reasonable expenses (including attorneys' fees) actually
incurred by such Indemnitee in connection with any Proceeding, to the fullest
extent that such indemnification may be lawful under Maryland law. The
Corporation shall pay any reasonable expenses so incurred by such Indemnitee in
defending a Proceeding in advance of the final disposition thereof to the
fullest extent that such advance payment may be lawful under Maryland law.
Subject to any applicable limitations and requirements set forth in the
Corporation's Articles of Incorporation and in these By-laws, any payment of
indemnification or advance of expenses shall be made in accordance with the
procedures set forth in Maryland law.
(b) Anything in this Section 48 to the contrary
notwithstanding, nothing in this Section 48 shall protect or purport to protect
any Indemnitee against any liability to the Corporation or its stockholders,
whether or not there has been an adjudication of liability, to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office ("Disabling Conduct").
(c) Anything in this Section 48 to the contrary
notwithstanding, no indemnification shall be made by the Corporation to any
Indemnitee unless:
(i) there is a final decision on the merits by a
court or other body before whom the
Proceeding was brought that the Indemnitee
was not liable by reason of Disabling
Conduct; or
(ii) in the absence of such a decision, there is
a reasonable determination, based upon a
review of the facts, that the Indemnitee was
not liable by reason of Disabling Conduct,
which determination shall be made by:
(A) the vote of a majority of a quorum
of directors who are neither
"interested persons" of the
Corporation as defined in Section
2(a)(19) of the Investment Company
Act, nor parties to the Proceeding;
or
(B) an independent legal counsel in a
written opinion.
(d) Anything in this Section 48 to the contrary
notwithstanding, any advance of expenses by the Corporation to any Indemnitee
shall be made only upon the undertaking by such Indemnitee to repay the advance
unless it is ultimately determined that such Indemnitee is entitled to
indemnification as above provided, and only if one of the following conditions
is met:
(i) the Indemnitee provides a security for his
undertaking; or
(ii) the Corporation shall be insured against losses
arising by reason of any lawful advances; or
(iii) there is a determination, based on a review
of readily available facts (which review shall not
require a full trial-type inquiry), that there is
reason to believe that the Indemnitee will
ultimately be found entitled to indemnification,
which determination shall be made by:
(A) a majority of a quorum of directors
who are neither "interested persons"
of the Corporation as defined in
Section 2(a)(19) of the Investment
Company Act, nor parties to the
Proceeding; or
(B) an independent legal counsel in a
written opinion.
Section 49. To the fullest extent permitted by applicable Maryland law
and by Sections 17(h) and 17(i) of the Investment Company Act, or any successor
provisions thereto or interpretations thereunder, the Corporation may purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, other enterprise, or employee benefit plan, against any liability
asserted against him and incurred by him in any such capacity or arising out of
his position, whether or not the Corporation would have the power to indemnify
him against such liability pursuant to Section 2-418 of the Maryland General
Corporation Law.
AMENDMENTS
Section 50. The Board of Directors shall have the power, at any regular
meeting or at any special meeting if notice thereof be included in the notice of
such special meeting, to alter or repeal any or all By-laws of the Corporation
and to adopt new Bylaws.
--------------------------------
I, the undersigned, being the Secretary of TCI Portfolios, Inc., do
hereby certify the foregoing to be the By-laws of said Corporation, as adopted
at a meeting of the Board of Directors held the 23rd day of November, 1991.
/s/ William M. Lyons
William M. Lyons
MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of August, 1994, is by and
between TCI Portfolios, Inc., a Maryland corporation (hereinafter called the
"Corporation") and Investors Research Corporation, a Delaware corporation
(hereinafter called the "Investment Manager"). In consideration of the mutual
promises and agreements herein contained, the parties agree as follows:
1. INVESTMENT MANAGEMENT SERVICES. The Investment Manager shall
supervise the investments of each series of shares of the Corporation
contemplated as of the date hereof, and such subsequent series of shares as the
Corporation shall select the Investment Manager to manage. In such capacity, the
Investment Manager shall maintain a continuous investment program for each such
series, determine what securities shall be purchased or sold by each series,
secure and evaluate such information as it deems proper and take whatever action
is necessary or convenient to perform its functions, including the placing of
purchase and sale orders.
2. COMPLIANCE WITH LAWS. All functions undertaken by the Investment
Manager hereunder shall at all times conform to, and be in accordance with,
any requirements imposed by:
(1) the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and any rules and regulations promulgated thereunder;
(2) any other applicable provisions of law;
(3) the Articles of Incorporation of the Corporation as amended from
time to time;
(4) the By-laws of the Corporation as amended from time to time; and
(5) the registration statements of the Corporation, as amended from
time to time, filed under the Securities Act of 1933 and the Investment
Company Act.
3. BOARD SUPERVISION. All of the functions undertaken by the
Investment Manager hereunder shall at all times be subject to the direction of
the Board of Directors of the Corporation, its Executive Committee, or any
committee or officers of the Corporation acting under the authority of the
Board of Directors.
4. PAYMENT OF EXPENSES. The Investment Manager will pay all of the
expenses of each series of the Corporation's shares that it shall manage, other
than interest, taxes, brokerage commissions, extraordinary expenses and the fees
and expenses (including counsel fees) of those directors who are not "interested
persons" as defined in Investment Company Act (hereinafter referred to as the
"Independent Directors"). The Investment Manager will provide the Corporation
with all physical facilities and personnel required to carry on the business of
each series that the Investment Manager shall manage, including but not limited
to office space, office furniture, fixtures and equipment, office supplies,
computer hardware and software and salaried and hourly paid personnel. The
Investment Manager may at its expense employ others to provide all or any part
of such facilities and personnel.
5. ACCOUNT FEES. The Corporation, by resolution of the Board of
Directors, including a majority of the Independent Directors, may from time to
time authorize the imposition of a fee as a direct charge against shareholder
accounts of one or more of the series, such fee to be retained by the
Corporation or to be paid to the Investment Manager to defray expenses which
would otherwise be paid by the Investment Manager in accordance with the
provisions of paragraph 4 of this Agreement. At least sixty (60) days' prior
written notice of the intent to impose such fee must be given to the
shareholders of the affected series.
6. MANAGEMENT FEES.
(a) In consideration of the services provided by the
Investment Manager, each series of shares of the Corporation managed by
the Investment Manager shall pay to the Investment Manager a per annum
management fee (hereinafter, the "Applicable Fee"), as follows:
NAME OF SERIES APPLICABLE FEE
TCI Growth 1.0%
TCI Balanced 1.0%
TCI Advantage 1.0%
TCI International 1.5%
(b) On the first business day of each month, each series of
shares shall pay the management fee at the rate specified by
subparagraph (a) of this paragraph 6 to the Investment Manager for the
previous month. The fee for the previous month shall be calculated by
multiplying the Applicable Fee for such series by the aggregate average
daily closing value of the series' net assets during the previous
month, and further multiplying that product by a fraction, the
numerator of which shall be the number of days in the previous month,
and the denominator of which shall be 365 (366 in leap years).
(c) In the event that the Board of Directors of the
Corporation shall determine to issue any additional series
of shares for which it is proposed that the Investment
Manager serve as investment manager, the Corporation and the Investment
Manager shall enter into an Addendum to this Agreement setting forth
the name of the series, the Applicable Fee and such other terms and
conditions as are applicable to the management of such series of
shares.
7. CONTINUATION OF AGREEMENT. This Agreement shall continue in effect,
unless sooner terminated as hereinafter provided, for a period of two years from
the execution hereof, and for as long thereafter as its continuance is
specifically approved at least annually (i) by the Board of Directors of the
Corporation or by the vote of a majority of the outstanding voting securities of
the Corporation, and (ii) by the vote of a majority of the directors of the
Corporation, who are not parties to the agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval.
8. TERMINATION. This Agreement may be terminated by the Investment
Manager at any time without penalty upon giving the Corporation 60 days' written
notice, and may be terminated at any time without penalty by the Board of
Directors of the Corporation or by vote of a majority of the outstanding voting
securities of the Corporation on 60 days' written notice to the Investment
Manager.
9. EFFECT OF ASSIGNMENT. This Agreement shall automatically terminate
in the event of assignment by the Investment Manager, the term "assignment" for
this purpose having the meaning defined in Section 2(a)(4) of the Investment
Company Act.
10. OTHER ACTIVITIES. Nothing herein shall be deemed to limit or
restrict the right of the Investment Manager, or the right of any of its
officers, directors or employees (who may also be a director, officer or
employee of the Corporation), to engage in any other business or to devote time
and attention to the management or other aspects of any other business, whether
of a similar or dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association.
11. STANDARD OF CARE. In the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations or duties hereunder
on the part of the Investment Manager, it, as an inducement to it to enter into
this Agreement, shall not be subject to liability to the Corporation or to any
shareholder of the Corporation for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
12. SEPARATE AGREEMENT. The parties hereto acknowledge that certain
provisions of the Investment Company Act, in effect, treat each series of shares
of an investment company as a separate investment company. Accordingly, the
parties hereto hereby acknowledge and agree that, to the extent deemed
appropriate and consistent with the Investment Company Act, this Agreement shall
be deemed to constitute a separate agreement between the Investment Manager and
each series of shares of the Corporation managed by the Investment Manager.
IN WITNESS WHEREOF, the parties have caused this Addendum to the
Agreement to be executed by their respective duly authorized officers as of the
day and year first above written.
Attest: TCI PORTFOLIOS, INC.
/s/ Patrick A. Looby /s/ James E. Stowers III
Patrick A. Looby James E. Stowers III
Secretary President
Attest: INVESTORS RESEARCH
CORPORATION
/s/ William M. Lyons /s/ James E. Stowers III
William M. Lyons James E. Stowers III
Secretary President
CUSTODY AGREEMENT
Dated September 12, 1995
Between
UMB BANK, N.A.
and
INVESTORS RESEARCH CORPORATION
and
THE TWENTIETH CENTURY MUTUAL FUNDS
<PAGE>
Table of Contents
SECTION PAGE
1. APPOINTMENT OF CUSTODIAN 1
2. DEFINITIONS 1
(a) Securities 1
(b) Assets 2
(c) Instructions 2
3. DELIVERY OF CORPORATE DOCUMENTS 2
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC
SUBCUSTODIAN 3
(a) Safekeeping 4
(b) Manner of Holding Securities 4
(c) Free Delivery of Assets 6
(d) Exchange of Securities 6
(e) Purchases of Assets 6
(f) Sales of Assets 7
(g) Options 7
(h) Futures Contracts 8
(i) Segregated Accounts 9
(j) Depositary Receipts 9
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 9
(l) Interest Bearing Deposits 10
(m) Foreign Exchange Transactions 10
(n) Pledges or Loans of Securities 11
(o) Stock Dividends, Rights, Etc. 12
(p) Routine Dealings 12
(q) Collections 12
(r) Bank Accounts 12
(s) Dividends, Distributions and Redemptions 13
(t) Proceeds from Shares Sold 13
(u) Proxies and Notices; Compliance with the
Shareholders Communication Act of 1985 13
(v) Books and Records 14
(w) Opinion of Fund's Independent Certified
Public Accountants 14
(x) Reports by Independent Certified Public
Accountants 14
(y) Bills and Other Disbursements 14
5. SUBCUSTODIANS 14
(a) Domestic Subcustodians 15
(b) Foreign Subcustodians 15
(c) Interim Subcustodians 16
(d) Special Subcustodians 16
(e) Termination of a Subcustodian 17
(f) Certification Regarding Foreign Subcustodians 17
6. STANDARD OF CARE 17
(a) General Standard of Care 17
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SECTION PAGE
(b) Actions Prohibited by Applicable Law, Events
Beyond Custodian's Control, Armed Conflict,
Sovereign Risk, Etc. 17
(c) Liability for Past Records 18
(d) Advice of Counsel 18
(e) Advice of the Funds and Others 18
(f) Instructions Appearing to be Genuine 18
(g) Exceptions from Liability 19
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS 19
(a) Domestic Subcustodians 19
(b) Securities Systems, Interim Subcustodians,
Special Subcustodians, Securities
Depositories and Clearing Agencies 19
(c) Defaults or Insolvencies of Brokers, Banks
Etc. 20
(d) Reimbursement of Expenses 20
8. INDEMNIFICATION 20
(a) Indemnification by Fund 20
(b) Indemnification by Custodian 20
9. ADVANCES 21
10. COMPENSATION 21
11. POWERS OF ATTORNEY 21
12. TERMINATION AND ASSIGNMENT 22
13. ADDITIONAL FUNDS 22
14. NOTICES 22
15. MISCELLANEOUS 23
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this 12th day of September 1995, between UMB
Bank, n.a., a national banking association with its principal place of business
located at Kansas City, Missouri (hereinafter "Custodian"), and Investors
Research Corporation (hereinafter "IRC"), and each of the registered investment
companies that have executed the signature page hereof, together with such
additional registered investment companies that shall be made parties to this
Agreement by the execution of a separate signature page hereto (individually, a
"Fund Company" and collectively, the "Fund Companies").
WITNESSETH:
WHEREAS, each Fund Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, IRC is a registered investment adviser and provides, either
directly or through one o more of its affiliates, investment management and
administrative services to the Fund Companies; and
WHEREAS, each Fund Company desires to appoint Custodian as its
custodian for the custody of Assets (as hereinafter defined) owned by the
various series of shares of each such Fund Company which Assets are to be held
in such accounts as such Fund Company may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms
and conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN.
Each Fund Company hereby constitutes and appoints the Custodian as
custodian of Assets belonging to the various series of shares of each such Fund
Company which have been or may be from time to time deposited with the Custodian
or any Subcustodian (as defined in Section 5 below) duly appointed as set forth
herein. Custodian accepts such appointment as a custodian and agrees to perform
the duties and responsibilities of Custodian as set forth herein on the
conditions set forth herein. It is understood and agreed to the parties hereto
that wherever in this agreement it is stated or implied that an action is to be
taken or performed by the Fund Companies, that such action shall be taken or
performed by IRC or its affiliates.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings so indicated:
(a) "Security" or "Securities" shall have the same meaning
ascribed to such term under Section 2(36) of the 1940 Act.
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(b) "Assets" shall mean Securities, monies and other property
held by the Custodian for the benefit of a Fund Company.
(c) (1) "Instructions," as used herein, shall mean: (i) a
tested telex, a written (including, without limitation, facsimile transmission)
request, direction, instruction or certification signed or initialed by or on
behalf of a Fund Company by an Authorized Person (defined in Section 3 below);
(ii) a telephonic or other oral communication from a person the Custodian
reasonably believes to be an Authorized Person; or (iii) a communication
effected directly between an electro-mechanical or electronic device or system
(including, without limitation, computers) on behalf of a Fund Company.
Instructions in the form of oral communications shall be confirmed by the
appropriate Fund Company by tested telex or in writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral Instructions prior
to the Custodian's receipt of such confirmation. Each Fund Company authorizes
the Custodian to record any and all telephonic or other oral Instructions
communicated to the Custodian.
(2) "Special Instructions," as used herein, shall mean
Instructions countersigned or confirmed in writing by the Treasurer or any
Controller of a Fund Company or any other person designated by the Treasurer of
such Fund Company in writing, which countersignature or confirmation shall be
included on the same instrument containing the Instructions or on a separate
instrument relating thereto.
(3) Instructions and Special Instructions shall be
delivered to the Custodian at the address and/or telephone, facsimile
transmission or telex number agreed upon from time to time by the Custodian and
each Fund Company.
(4) Where appropriate, Instructions and Special
Instructions shall be continuing instructions.
(d) "Domestic Subcustodian" shall mean those entities
specifically identified as such on Appendix A attached hereto and such other
entities as may be appointed "Domestic Subcustodians" pursuant to Section 5(a)
below.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution
does not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund Company has furnished the Custodian with copies, properly
certified or authenticated, with all amendments or supplements thereto, of the
following documents:
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(a) Resolutions of the Board of Directors of the Fund Companies
appointing the Custodian and approving the form of this
Agreement; and
(b) Each Fund Company's current prospectus and statements of
additional information.
IRC will furnish the Custodian with copies of any updates, amendments or
supplements to each Fund Company's prospectus and SAI upon request of the
foregoing documents.
In addition, each Fund Company has delivered or will promptly deliver
to the Custodian, copies of the Resolution(s) of its Board of Directors or
Trustees and all amendments or supplements thereto, properly certified or
authenticated, designating certain officers or employees of IRC or its
affiliates who will have continuing authority to certify to the Custodian: (a)
the names, titles, signatures and scope of authority of all persons authorized
to give Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of each Fund Company, and (b) the names,
titles and signatures of those persons authorized to countersign or confirm
Special Instructions on behalf of each Fund Company (in both cases collectively,
the "Authorized Persons" and individually, an "Authorized Person"). Such
Resolutions and certificates may be accepted and relied upon by the Custodian as
conclusive evidence of the facts set forth therein and shall be considered to be
in full force and effect until revoked by telephone by any such officer or
employee or by any Authorized Person, or until delivery to the Custodian of a
similar Resolution or certificate to the contrary, whichever first occurs. Upon
delivery of a certificate which deletes or does not include the name(s) of a
person previously authorized to give Instructions or to countersign or confirm
Special Instructions, such persons shall no longer be considered an Authorized
Person authorized to give Instructions or to countersign or confirm Special
Instructions. Unless the certificate specifically requires that the approval of
anyone else will first have been obtained, the Custodian will be under no
obligation to inquire into the right of the person giving such Instructions or
Special Instructions to do so. Custodian from a Fund Company will be deemed to
authorize or permit any director, trustee, officer, employee, or agent of such
Fund Company or of IRC to withdraw any of the Assets of such Fund Company for
his or her own personal use or receipt or to be an account not registered in the
name of the Fund Companies upon the mere receipt of such authorization, Special
Instructions or Instructions from such director, trustee, officer, employee or
agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
The Custodian shall have and perform the powers and duties hereinafter
set forth in this Section 4. For purposes of this Section 4 all references to
powers and duties of the "Custodian" shall also refer to any Domestic
Subcustodian, whichever first occurs.
3
<PAGE>
(a) Safekeeping.
The Custodian will keep safely the Assets of each Fund Company
which are delivered to it from time to time. The Custodian shall not be
responsible for any property of a Fund held or received by such Fund and not
delivered to the Custodian or Subcustodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times in accordance with
Instructions received from IRC hold Securities of each Fund Company either: (i)
by physical possession of the share certificates or other instruments
representing such Securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in accordance with the
provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities
which have been delivered to it in physical form, by registering the same in the
name of the Custodian or its nominee, for whose actions Custodian shall be fully
responsible. Upon the receipt of Instructions, the Custodian shall hold such
Securities in street certificate form, so called, with or without any indication
of fiduciary capacity. However, unless it receives Instructions to the contrary,
the Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the appropriate Fund Company or only
assets held by the Custodian as a fiduciary, provided that the records of the
Custodian shall accurately reflect at all times the Fund Company or other
customer for which such Securities are held in such accounts and the respective
interests therein.
(3) Upon receipt of Instructions, the Custodian will deposit
and/or maintain domestic Securities owned by a Fund Company in, and each Fund
Company hereby approves use of: (a) The Depository Trust Company; (b) The
Participants Trust Company; and (c) any book-entry system as provided in (i)
Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii) Subpart B of
Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or (iii) the
book-entry regulations of federal agencies substantially in the form of 31 CRT
306.115. Upon the receipt of Special Instructions, the Custodian will deposit
and/or maintain domestic Securities owned by a Fund Company in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System," and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
4
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(i) The Custodian may deposit the Securities directly or
through one or more agents or Subcustodians which are
also qualified to act as custodians for investment
companies.
(ii) The Custodian shall deposit and/or maintain the
Securities in a Securities System, provided that such
Securities are represented in an account ("Account")
of the Custodian in the Securities System that
includes only assets held by the Custodian as a
fiduciary, custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all
times identify those Securities belonging to any one
or more of the Fund Companies that are maintained in
a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of a Fund Company only upon (a) receipt of advice
from the Securities System that such Securities have been
transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making
of an entry on the records of the Custodian to reflect such
payment and transfer for the account of such Fund Company.
The Custodian shall transfer Securities sold for the account
of a Fund Company only upon (a) receipt of advice from the
Securities System that payment for such Securities has been
transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making
of an entry on the records of the Custodian to reflect such
transfer and payment for the account of such Fund Company.
Copies of all advices from the Securities System relating to
transfers of Securities for the account of a Fund Company
shall be maintained for such Fund Company by the Custodian.
The Custodian shall deliver to a Fund Company on the next
succeeding business day daily transaction reports which
shall include each day's transactions in the Securities
System for the account of such Fund Company. Such
transaction reports shall be delivered to such Fund Company
or any agent designated by such Fund Company pursuant to
Instructions, by computer or in such other manner as such
Fund Company and Custodian may agree.
(v) The Custodian shall provide such Fund Company with
reports obtained by the Custodian or any Subcustodian
with respect to a Securities System's accounting
system, internal accounting control and procedures
for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian
shall terminate the use of any Securities System on
behalf of a Fund Company as promptly as practicable
and shall take all actions reasonably practicable to
safeguard the Securities of such Fund Company
maintained with such Securities System.
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(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement and
except as provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Fund Company's
transactions and to transfer such Assets to such broker, dealer, Subcustodian,
bank agent, Securities System or otherwise as specified in such Special
Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange
portfolio Securities held by it for a Fund for other Securities or cash paid in
connection with any reorganization, recapitalization, merger, consolidation, or
conversion of convertible Securities, and will tender any such portfolio
Securities in accordance with the terms of any reorganization or protective
plan.
Without Instructions, the Custodian is authorized to exchange
Securities held by it in temporary form for Securities in definitive form, to
surrender Securities for transfer into a name or nominee name as permitted in
Section 4(b)(2), to effect an exchange of shares in a stock split or when the
par value of the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other Securities held by it at
maturity or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for a Fund Company's account for which the
purchase was made, but only insofar as monies are available therein for such
purpose, and receive the portfolio Securities so purchased. Unless the Custodian
has received Special Instructions to the contrary, such payment will be made
only upon receipt of Securities by the Custodian, a clearing corporation of a
national Securities exchange of which the Custodian is a member, or a Securities
System in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, upon receipt of Instructions: (i) in connection
with a repurchase agreement, the Custodian may release funds to a Securities
System prior to the receipt of advice from the Securities System that the
Securities underlying such repurchase agreement have been transferred by
book-entry into the Account maintained with such Securities System by the
Custodian, provided that the Custodian's instructions to the Securities System
require that the Securities System may make payment of such funds to the other
party to the repurchase agreement only upon transfer by book-entry of the
Securities underlying the repurchase agreement into such Account; (ii) in the
case of Interest Bearing Deposits (defined in Section 4(e) below), currency
deposits, and other deposits, foreign exchange transactions, futures contracts
or options, pursuant to Sections 4(g), 4(h), 4(l), and 4(m) hereof, the
Custodian may make payment therefor before receipt of an advice of transaction;
and (iii) in the case of Securities as to which payment for the Security and
receipt of the instrument evidencing the Security
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are under generally accepted trade practice or the terms of the instrument
representing the Security expected to take place in different locations or
through separate parties, such as commercial paper which is indexed to foreign
currency exchange rates, derivatives and similar Securities, the Custodian may
make payment for such Securities prior to delivery thereof in accordance with
such generally accepted trade practice or the terms of the instrument
representing such Security.
(2) Other Assets Purchased. Upon receipt of Instructions and
except as otherwise provided herein, the Custodian shall pay for and receive
other Assets for the account of a Fund Company as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the
Custodian will, with respect to a sale, deliver or cause to be delivered the
Securities thus designated as sold to the broker or other person specified in
the Instructions relating to such sale. Unless the Custodian has received
Special Instructions to the contrary, such delivery shall be made only upon
receipt of payment therefor in the form of: (a) cash, certified check, bank
cashier's check, bank credit, or bank wire transfer; (b) credit to the account
of the Custodian with a clearing corporation of a national Securities exchange
of which the Custodian is a member; or (c) credit to the Account of the
Custodian with a Securities System, in accordance with the provisions of Section
4(b)(3) hereof. Notwithstanding the foregoing, Securities held in physical form
may be delivered and paid for in accordance with "street delivery custom" to a
broker or its clearing agent, against delivery to the Custodian of a receipt for
such Securities, provided that the Custodian shall have taken reasonable steps
to ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except
as otherwise provided herein, the Custodian shall receive payment for and
deliver other Assets for the account of a Fund Company as provided in
Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of
an option or sale of a covered call option, the Custodian shall: (a) receive and
retain confirmations or other documents, if any, evidencing the purchase or
writing of the option by a Fund Company; (b) if the transaction involves the
sale of a covered call option, deposit and maintain in a segregated account the
Securities (either physically or by book-entry in a Securities System) subject
to the covered call option written on behalf of such Fund; and (c) pay, release
and/or transfer such Securities, cash or other Assets in accordance with any
notices or other communications evidencing the expiration,
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termination or exercise of such options which are furnished to the Custodian by
the Options Clearing Corporation (the "OCC"), the securities or options
exchanges on which such options were traded, or such other organization as may
be responsible for handling such options were traded, or such other organization
as may be responsible for handling such option transactions.
(2) Upon receipt of Instructions relating to the sale of a
naked option (including stock index and commodity options), the Custodian, the
appropriate Fund Company and the broker-dealer shall enter into an agreement to
comply with the rules of the OCC or of any registered national securities
exchange or similar organization(s). Pursuant to that agreement and such Fund
Company's Instructions, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the writing of the option;
(b) deposit and maintain in a segregated account, Securities (either physically
or by book-entry in a Securities System), cash and/or other Assets in an amount
specified in the Instructions; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any such agreement and with
any notices or other communications evidencing the expiration, termination or
exercise of such option which are furnished to the Custodian by the OCC, the
securities or options exchanges on which such options were traded, or such other
organization as may be responsible for handling such option transactions. The
appropriate Fund Company and the broker-dealer shall be responsible for
determining the quality and quantity of assets held in any segregated account
established in compliance with applicable margin maintenance requirements and
the performance of other terms of any option contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a
futures margin procedural agreement among the appropriate Fund Company, the
Custodian and the designated futures commission merchant (a "Procedural
Agreement"). Under the Procedural Agreement the Custodian shall: (a) receive and
retain confirmations, if any, evidencing the purchase or sale of a futures
contract or an option on a futures contract by such Fund Company; (b) deposit
and maintain in a segregated account cash, Securities and/or other Assets
designated as initial, maintenance or variation "margin" deposits intended to
secure such Fund Company's performance of its obligations under any futures
contracts purchased or sold, or any options on futures contracts written by such
Fund Company, in accordance with the provisions of any Procedural Agreement
designed to comply with the provisions of the Commodity Futures Trading
Commission and/or any commodity exchange or contract market (such as the Chicago
Board of Trade), the Securities Exchange Commission ("SEC"), or any similar
organization(s), regarding such margin deposits; and (c) release Assets from
and/or transfer Assets into such margin accounts only in accordance with any
such Procedural Agreements. The appropriate Fund Company and such futures
commission merchant shall be responsible for determining the type and amount of
Assets held in the segregated account or paid to the broker-dealer in compliance
with applicable margin maintenance requirements and the performance of any
futures contract or option on a futures contract in accordance with its terms.
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(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish
and maintain on its books a segregated account or accounts for and on behalf of
a Fund Company, into which account or accounts may be transferred Assets of such
Fund Company, including Securities maintained by the Custodian in a Securities
System pursuant to Paragraph (b)(3) of this Section 4, said account or accounts
to be maintained (i) for the purposes set forth in Sections 4(g), 4(h) and 4(n)
and (ii) for the purpose of compliance by such Fund Company with the procedures
required by the SEC Investment Company Act Release Number 10666 or any
subsequent release or releases relating to the maintenance of segregated
accounts by registered investment companies, or (iii) for such other purposes as
may be set forth, from time to time, in Special Instructions. The Custodian
shall not be responsible for the determination of the type or amount of Assets
to be held in any segregated account referred to in this paragraph, or for
compliance by the Fund Companies with required procedures noted in (ii) above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall exchange, or
cause to be exchanged, Securities held on behalf of a Fund Company for American
Depositary Receipts or International Depositary Receipts (hereinafter referred
to, collectively, as "ADRs") representing such Securities. To effect such
exchange, the Custodian or Subcustodian shall surrender the Securities to the
depository of the issuer of the applicable ADR, against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the Custodian or Subcustodian surrendering the same that the depositary has
acknowledged receipt of instructions to issue ADRs with respect to such
Securities in the name of the Custodian or a nominee of the Custodian, for
delivery in accordance with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or
cause to be surrendered ADRs to the issuer thereof, against a written receipt
therefor adequately describing the ADRs surrendered and written evidence
satisfactory to the organization surrendering the same that the issuer of the
ADRs has acknowledged receipt of instructions to cause its depository to deliver
the Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar Securities to the issuer or trustee
thereof (or to the agent of such issuer or trustee) for the purpose of exercise
or sale, provided that the new Securities, cash or other Assets, if any,
acquired as a result of such actions are to be delivered to the Custodian; and
(b) deposit Securities upon invitations for tenders thereof, provided that the
consideration for such Securities is to be paid or delivered to the Custodian,
or the tendered Securities are to be returned to the Custodian.
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Notwithstanding any provision of this Agreement to the
contrary, the Custodian shall take all necessary action, unless otherwise
directed to the contrary in Instructions, to comply with the terms of all
mandatory or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and shall notify the appropriate Fund Company of
such action in writing by facsimile transmission or in such other manner as such
Fund Company and Custodian may agree in writing.
IRC agrees that if it gives an Instruction for the performance
of an act after the deadline prescribed by the Custodian for the performance of
such act, the Custodian shall use reasonable efforts to perform such act, but
the Fund Company shall hold the Custodian harmless from any adverse consequences
in connection with any failure to effect such Instructions. The Custodian agrees
to establish reasonable deadlines by which Instructions must be given.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to
purchase interest bearing fixed term and call deposits (hereinafter referred to,
collectively, as "Interest Bearing Deposits") for the account of a Fund Company,
the Custodian shall purchase such Interest Bearing Deposits in the name of such
Fund Company with such banks or trust companies, including the Custodian, any
Subcustodian or any subsidiary or affiliate of the Custodian (hereinafter
referred to as "Banking Institutions"), and in such amounts as such Fund Company
may direct pursuant to Instructions. Such Interest Bearing Deposits may be
denominated in U.S. dollars or other currencies, as such Fund Company may
determine and direct pursuant to Instructions. The responsibilities of the
Custodian to a Fund Company for Interest Bearing Deposits issued by the
Custodian shall be that of a U.S. bank for a similar deposit. With respect to
Interest Bearing Deposits other than those issued by the Custodian, (a) the
Custodian shall be responsible for the collection of income and the transmission
of cash to and from such accounts; and (b) the Custodian shall have no duty with
respect to the selection of the Banking Institution or for the failure of such
Banking Institution to pay upon demand.
(m) Foreign Exchange Transactions.
(1) Each Fund hereby appoints the Custodian
as its agent in the execution of certain currency exchange transactions. The
Custodian agrees to provide exchange rate and U.S. Dollar information, in
writing, to the Funds. Such information shall be supplied by the Custodian at
least by the business day prior to the value date of the foreign exchange
transaction, provided that the Custodian receives the request for such
information at least two business days prior to the value date of the
transaction.
(2) Upon receipt of Instructions, the Custodian
shall settle foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf of and for the account of a
Fund with such currency brokers or Banking Institutions as such Fund may
determine and direct pursuant to Instructions.
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(3) Each Fund Company accepts full
responsibility for its use of third party foreign exchange brokers and for
execution of said foreign exchange contracts and understands that the Fund
Company shall be responsible for any and all costs and interest charges which
may be incurred as a result of the failure or delay of its third party broker to
deliver foreign exchange. The Custodian shall have no responsibility or
liability with respect to the selection of the currency brokers or Banking
Institutions with which a Fund Company deals or the performance of such brokers
or Banking Institutions.
(4) Notwithstanding anything to the contrary
contained herein, upon receipt of Instructions the Custodian may, in connection
with a foreign exchange contract, make free outgoing payments of cash in the
form of U.S. Dollars or foreign currency prior to receipt of confirmation of
such foreign exchange contract or confirmation that the countervalue currency
completing such contract has been delivered or received.
(5) The Custodian shall not be obligated to
enter into foreign exchange transactions as principal. However, if the Custodian
has made available to a Fund Company its services as a principal in foreign
exchange transactions and subject to any separate agreement between the parties
relating to such transactions, the Custodian shall enter into foreign exchange
contracts or options to purchase and sell foreign currencies for spot and future
delivery on behalf of and for the account of the Fund Company, with the
Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from a Fund
Company, the Custodian will release or cause to be released Securities held in
custody to the pledgees designated in such Instructions by way of pledge or
hypothecation to secure loans incurred by such Fund Company with various lenders
including but not limited to the Custodian; provided, however, that the
Securities shall be released only upon payment to the Custodian of the monies
borrowed, except that in cases where additional collateral is required to secure
existing borrowings, further Securities may be released or delivered, or caused
to be released or delivered for that purpose upon receipt of Instructions. Upon
receipt of Instructions, the Custodian will pay, but only from funds available
for such purpose, any such loan upon re-delivery to it of the Securities pledged
or hypothecated therefor and upon surrender of the note or notes evidencing such
loan. In lieu of delivering collateral to a pledgee, the Custodian, on the
receipt of Instructions, shall transfer the pledged Securities to a segregated
account for the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a
separate Securities Lending Agreement, the Custodian will release Securities
held in custody to the borrower designated in such Instructions and may, except
as otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate
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Fund to the borrower thereof only upon receipt of the collateral for such
borrowing. The Custodian shall have no responsibility or liability for any loss
arising from the delivery of Securities prior to the receipt of collateral. Upon
receipt of Instructions and the loaned Securities, the Custodian will release
the collateral to the borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock dividends,
rights, and other items of like nature and, upon receipt of Instructions, take
action with respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and
mechanical matters in accordance with industry standards in connection with the
sale, exchange, substitution, purchase, transfer, or other dealings with
Securities or other property of each Fund Company except as may be otherwise
provided in this Agreement or directed from time to time by Instructions from
any particular Fund Company.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to
each Fund Company with respect to portfolio Securities and other Assets; (b)
promptly credit to the account of each Fund Company all income and other
payments relating to portfolio Securities and other Assets held by the Custodian
hereunder upon Custodian's receipt of such income or payments or as otherwise
agreed in writing by the Custodian and any particular Fund Company; (c) promptly
endorse and deliver any instruments required to effect such collection; and (d)
promptly execute ownership and other certificates and affidavits for all
federal, state, local and foreign tax purposes in connection with receipt of
income or other payments with respect to portfolio Securities and other Assets,
or in connection with the transfer of such Securities or other Assets; provided,
however, that with respect to portfolio Securities registered in so-called
street name, or physical Securities with variable interest rates, the Custodian
shall use its best efforts to collect amounts due and payable to any such Fund
Company. The Custodian shall notify a Fund Company in writing by facsimile
transmission or in such other manner as such Fund Company and Custodian may
agree in writing if any amount payable with respect to portfolio Securities or
other Assets is not received by the Custodian when due. The Custodian shall not
be responsible for the collection of amounts due and payable with respect to
portfolio Securities or other Assets that are in default.
(f) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank
account or accounts on the books of the Custodian; provided that such bank
account(s) shall be in the name of the Custodian or a nominee thereof, for the
account of one or more of the Fund Companies, and shall be subject only to
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draft or order of the Custodian; and provided further, that the records of the
Custodian shall identify the amount of Assets of each Fund Company on deposit in
such bank account(s) and the responsibility of the Custodian with respect to the
portion of such bank account(s) attributable to each Fund Company shall be that
of a U.S. bank for a similar amount deposited in a similar account.
(s) Dividends, Distributions and Redemptions.
To enable each Fund Company to pay dividends or other
distributions to shareholders of each such Fund Company and to make payment to
shareholders who have requested repurchase or redemption of their shares of each
such Fund Company (collectively, the "Shares"), the Custodian shall release cash
or Securities insofar as available. In the case of cash, the Custodian shall,
upon the receipt of Instructions, transfer such funds by check or wire transfer
to any account at any bank or trust company designated by each such Fund Company
in such Instructions. In the case of Securities, the Custodian shall, upon the
receipt of Special Instructions, make such transfer to any entity or account
designated by each such Fund Company in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments
received for shares issued or sold from time to time by each Fund Company, and
shall credit such funds to the account of the appropriate Fund Company. The
Custodian shall notify the appropriate Fund Company of Custodian's receipt of
cash in payment for shares issued by such Fund Company by facsimile transmission
or in such other manner as such Fund Company and the Custodian shall agree. Upon
receipt of Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for shares as may be set forth in such
Instructions and at a time agreed upon between the Custodian and such Fund
Company; and (b) make federal funds available to a Fund Company as of specified
times agreed upon from time to time by such Fund Company and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund Company.
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985.
The Custodian shall deliver or cause to be delivered to the
appropriate Fund Company all forms of proxies, all notices of meetings, and any
other notices or announcements affecting or relating to Securities owned by such
Fund Company that are received by the Custodian, any Subcustodian, or any
nominee of either of them, and, upon receipt of Instructions, the Custodian
shall execute and deliver, or cause such Subcustodian or nominee to execute and
deliver, such proxies or other authorizations as may be required. Except as
directed pursuant to Instructions, neither the Custodian nor any Subcustodian or
nominee shall vote upon any such Securities, or execute any proxy to vote
thereon, or give any consent or take any other action with respect thereto.
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The Custodian will not release the identity of any Fund
Company to an issuer which requests such information pursuant to the Shareholder
Communications Act of 1985 for the specific purpose of direct communications
between such issuer and nay such Fund Company unless IRC directs the Custodian
otherwise in writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its
activities under this Agreement as are required to be maintained by Rule 31a-1
under the Investment Company Act of 1940 ("the 1940 Act") and to preserve them
for the periods prescribed in Rule 31a-2 under the Act. These records shall be
open for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the appropriate Fund during normal business
hours of the Custodian.
The Custodian shall provide accountings relating to its
activities under this Agreement as shall be agreed upon by each Fund Company and
the Custodian.
(w) Opinion of Fund Companies' Independent Certified
Public Accountants.
The Custodian shall take all reasonable action as each Fund
Company may request to obtain from year to year favorable opinions from each
such Fund Companies' independent certified public accountants with respect to
the Custodian's activities hereunder and in connection with the preparation of
each such Fund Companies' periodic reports to the SEC and with respect to any
other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of a Fund Company, the Custodian shall deliver
to such Fund Company a written report prepared by the Custodian's independent
certified public accountants with respect to the services provided by the
Custodian under this Agreement, including, without limitation, the Custodian's
accounting system, internal accounting control and procedures for safeguarding
cash, Securities and other Assets, including cash, Securities and other Assets
deposited and/or maintained in a Securities System or with a Subcustodian. Such
report shall be of sufficient scope and in sufficient detail as may reasonably
be required by such Fund Company and as may reasonably be obtained by the
Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or
cause to be paid, all bills, statements, or other obligations of a Fund Company.
5. SUBCUSTODIANS.
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From time to time, in accordance with the relevant provisions
of this Agreement, the Custodian may appoint one or more Domestic Subcustodians,
Foreign Subcustodians, Special Subcustodians, or Interim Subcustodians (as each
are hereinafter defined) to act on behalf of any one or more of the Fund
Companies. A Domestic Subcustodian, in accordance with the provisions of this
Agreement, may also appoint a Foreign Subcustodian, Special Subcustodian, or
Interim Subcustodian to act on behalf of any one or more of the Fund Companies.
For purposes of this Agreement, all Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians and Interim Subcustodians shall be referred
to collectively as "Subcustodians."
(a) Domestic Subcustodians.
Subject to the prior written approval of IRC and the Funds,
the Custodian may appoint any bank as defined in Section 2(a)(5) of the 1940 Act
or any trust company or other entity, any of which meet the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act for the Custodian on behalf of any one or more Funds as a
subcustodian for purposes of holding Assets of such Fund(s) and performing other
functions of the Custodian within the United States (a "Domestic Subcustodian").
The Custodian's appointment of any such Domestic Subcustodian shall not be
effective without such prior written approval of IRC and the Fund Companies. In
connection with the appointment of any Domestic Subcustodian, the Custodian
shall enter into a subcustodian agreement with the proposed Domestic
Subcustodian in form and substance approved by IRC and each Fund Company. The
Custodian shall not consent to the amendment of any subcustodian agreement
entered into with a Domestic Subcustodian that materially affects IRC and Fund
Company's rights under such agreement, except upon prior written approval of IRC
and each Fund Company pursuant to Special Instructions. Each such duly approved
Domestic Subcustodian shall be listed on Appendix A attached hereto, as it may
be amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic
Subcustodian to appoint, any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Section 17(f) of the 1940
Act and the rules and regulations thereunder to act for the Custodian on behalf
of any one or more Funds as a subcustodian or sub-subcustodian (if appointed by
a Domestic Subcustodian) for purposes of holding Assets of the Fund(s) and
performing other functions of the Custodian in countries other than the United
States of America (hereinafter referred to as a "Foreign Subcustodian" in the
context of either a subcustodian or a sub-subcustodian); provided that the
Custodian shall have obtained written confirmation from each Fund Company of the
approval of the Board of Directors or other governing body of each such Fund
(which approval may be withheld in the sole discretion of such Board of
Directors or other governing body or entity) with respect to (i) the identity of
any proposed Foreign Subcustodian (including branch designation), (ii) the
country or countries in which, and the securities depositories or clearing
agencies (hereinafter "Securities Depositories and Clearing Agencies"), if any,
through which, the Custodian or any proposed
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Foreign Subcustodian is authorized to hold Securities and other Assets of each
such Fund Company, and (iii) the form and terms of the subcustodian agreement to
be entered into with such proposed Foreign Subcustodian. Each such duly approved
Foreign Subcustodian and the countries where and the Securities Depositories and
Clearing Agencies through which they may hold Securities and other Assets of the
Fund Companies shall be listed on Appendix A attached hereto, as it may be
amended, from time to time. Each Fund Company shall be responsible for informing
the Custodian sufficiently in advance of a proposed investment which is to be
held in a country in which no Foreign Subcustodian is authorized to act, in
order that there shall be sufficient time for the Custodian, or any Domestic
Subcustodian, to effect the appropriate arrangements with a proposed Foreign
Subcustodian, including obtaining approval as provided in this Section 5(b). In
connection with the appointment of any Foreign Subcustodian, the Custodian
shall, or shall cause the Domestic Subcustodian to, enter into a subcustodian
agreement with the Foreign Subcustodian in form and substance approved by IRC
and each such Fund Company. The Custodian shall not consent to the amendment of,
and shall cause any Domestic Subcustodian not to consent to the amendment of,
any agreement entered into with a Foreign Subcustodian, which materially affects
any Fund Company's rights under such agreement, except upon prior written
approval of such Fund Company pursuant to Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a Fund
Company shall invest in an Asset to be held in a country in which no Foreign
Subcustodian is authorized to act, the Custodian shall notify such Fund Company
in writing by facsimile transmission or in such other manner as such Fund
Company and the Custodian shall agree in writing of the unavailability of an
approved Foreign Subcustodian in such country; and upon the receipt of Special
Instructions from such Fund Company, the Custodian shall, or shall cause its
Domestic Subcustodian to, appoint or approve an entity (referred to herein as an
"Interim Subcustodian") designated in such Special Instructions to hold such
Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on
behalf of a Fund Company, appoint one or more banks, trust companies or other
entities designated in such Special Instructions to act for the Custodian on
behalf of such Fund Company as a subcustodian for purposes of: (i) effecting
third-party repurchase transactions with banks, brokers, dealers or other
entities through the use of a common custodian or subcustodian; (ii) providing
depository and clearing agency services with respect to certain variable rate
demand note Securities, (iii) providing depository and clearing agency services
with respect to dollar denominated Securities, and (iv) effecting any other
transactions designated by such Fund Company in such Special Instructions. Each
such designated subcustodian (hereinafter referred to as a "Special
Subcustodian") shall be listed on Appendix A attached hereto, as it may be
amended from time to time. In connection with the appointment of any Special
Subcustodian, the Custodian shall enter into a subcustodian agreement
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with the Special Subcustodian in form and substance approved by the appropriate
Fund Company in Special Instructions. The Custodian shall not amend any
subcustodian agreement entered into with a Special Subcustodian, or waive any
rights under such agreement, except upon prior approval pursuant to Special
Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon
notification to the appropriate Fund Companies, terminate any Subcustodian of
such Fund(s) in accordance with the termination provisions under the applicable
subcustodian agreement, and upon the receipt of Special Instructions, the
Custodian will terminate any Subcustodian in accordance with the termination
provisions under the applicable subcustodian agreement. Notwithstanding the
above, the Custodian may not terminate Morgan Stanley Trust Company as a
Domestic Subcustodian under this Agreement unless 60 days prior written notice
is provided to IRC and the Fund Companies.
(f) Certification Regarding Foreign Subcustodians.
Upon request of a Fund Company, the Custodian shall deliver to
such Fund Company a certificate stating: (i) the identity of each Foreign
Subcustodian then acting on behalf of the Custodian; (ii) the countries in which
and the Securities Depositories and Clearing Agencies through which each such
Foreign Subcustodian is then holding cash, Securities and other Assets of such
Fund Company; and (iii) such other information as may be requested by such Fund
Company, and as the Custodian shall be reasonably able to obtain, to evidence
compliance with rules and regulations under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to IRC and each Fund Company for
all losses, damages and reasonable costs and expenses (including reasonable
attorneys fees) suffered or incurred by IRC and each Fund Company in connection
with this Agreement resulting from the negligence or willful misconduct of the
Custodian.
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Sovereign Risk, Etc.
In no event shall the Custodian incur liability hereunder (i)
if the Custodian or any Subcustodian or Securities System, or any subcustodian,
Securities System, Securities Depository or Clearing Agency utilized by the
Custodian or any such Subcustodian, or any nominee of the Custodian or any
Subcustodian (individually, a "Person") is prevented, forbidden or delayed from
performing, or omits to perform, any act or thing which this Agreement provides
shall be performed or omitted to be performed, by reason of: (a) any provision
of any present or future law or regulation or order of the United States of
America, or any state thereof, or of any foreign country, or
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political subdivision thereof or of any court of competent jurisdiction (other
than a federal bankruptcy court) (and neither the Custodian nor any other Person
shall be obligated to take any action contrary thereto); or (b) any event beyond
the control of the Custodian or other Person such as armed conflict, riots,
labor disputes of third-party vendors, Fund Company equipment or transmission
failures, natural disasters, or failure of the mails, transportation,
communications or power supply; or (ii) for any loss, damage, cost or expense
resulting from "Sovereign Risk." A "Sovereign Risk" shall mean nationalization,
expropriation, currency devaluation, revaluation or fluctuation, confiscation,
seizure, cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition or
enforcement by any such governmental authority of currency restrictions,
exchange controls, taxes, levies or other charges affecting a Fund's Assets; or
acts of armed conflict, terrorism, insurrection or revolution.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have
any liability in respect of any loss, damage or expense suffered by a Fund
Company, insofar as such loss, damage or expense arises from the performance of
the Custodian or any Domestic Subcustodian as a result of reasonable reliance
upon records that were maintained for such Fund Company by entities other than
the Custodian or any Domestic Subcustodian prior to the Custodian's employment
hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled
to receive and act upon the written advice of counsel of its own choosing on all
matters (which may include counsel for the Fund Companies). The Custodian and
all Domestic Subcustodians shall be without liability for any actions taken or
omitted in good faith pursuant to the written advice of counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the
advice of any Fund and upon statements of such Fund's accountants and other
persons affiliated with the Fund Companies reasonably believed by it in good
faith to be expert in matters upon which they are consulted, and neither the
Custodian nor any Domestic Subcustodian shall be liable for any actions taken or
omitted, reasonably and in good faith, pursuant to such written advice or
statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully
protected and indemnified in acting as a custodian hereunder upon any
Resolutions of the Board of Directors or Trustees, Instructions, Special
Instructions, advice, notice, request, consent, certificate, instrument or paper
appearing to it to be genuine and to have been properly executed and
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shall, unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained from any Fund
Company hereunder a certificate signed by any officer of such Fund authorized to
countersign or confirm Special Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions
hereof, neither the Custodian nor any Domestic Subcustodian shall be under any
duty or obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased
by or for any Fund Company, the legality of the
purchase thereof or evidence of ownership required to
be received by any such Fund Company, or the
propriety of the decision to purchase or amount paid
therefor;
(ii) the legality of the sale of any Securities by or for any
Fund Company, or the propriety of the amount for which the
same were sold; or
(iii) any other expenditures, encumbrances of Securities,
borrowings or similar actions with respect to any Fund
Company's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund Company's Declaration of Trust,
Partnership Agreement, Articles of Incorporation or By-Laws or votes or
proceedings of the shareholders, trustees, partners or directors of any such
Fund Company, or any such Fund Company's currently effective Registration
Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians and Foreign Subcustodian
The Custodian shall be liable for the acts or omissions of any
Domestic Subcustodian and Foreign Subcustodian to the same extent as if such
actions or omissions were performed by the Custodian itself.
(b) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities Depositories and Clearing Agencies.
The Custodian shall not be liable to any Fund Company for any
loss, damage or expense suffered or incurred by such Fund resulting from or
occasioned by the actions or omissions of a Securities System, Interim
Subcustodian, Special Subcustodian, or Securities Depository and Clearing Agency
unless such loss, damage or expense is caused by, or results from, the
negligence or willful misconduct of the Custodian.
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(c) Defaults or Insolvencies of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or
expense suffered or incurred by any Fund Company resulting from or occasioned by
the actions, omissions, neglects, defaults or insolvency of any broker, bank,
trust company or any other person with whom the Custodian may deal (other than
any of such entities acting as a Subcustodian, Securities System or Securities
Depository and Clearing Agency, for whose actions the liability of the Custodian
is set out elsewhere in this Agreement) unless such loss, damage or expense is
caused by, or results from, the gross negligence or willful misconduct of the
Custodian.
(d) Reimbursement of Expenses.
IRC agrees to reimburse the Custodian for all reasonable
out-of-pocket expenses incurred by the Custodian in connection with this
Agreement, but excluding salaries and overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by IRC.
Subject to the limitations set forth in this Agreement, IRC
agrees to indemnify and hold harmless the Custodian and its nominees from all
losses, damages and expenses (including reasonable attorneys' fees) suffered or
incurred by the Custodian or its nominee caused by or arising from actions taken
by the Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement, the form of which has been approved by IRC; provided,
however, that such indemnity shall not apply to the extent the Custodian is
liable under Sections 6 or 7 hereof.
If any Fund Company requires the Custodian to take any action
with respect to Securities, which action involves the payment of money or which
may, in the opinion of the Custodian, result in the Custodian or its nominee
assigned to such Fund Company being liable for the payment of money or incurring
liability of some other form, such Fund Company, as a prerequisite to requiring
the Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in
addition to the obligations provided in Sections 6 and 7, the Custodian agrees
to indemnify and hold harmless by IRC and each Fund Company from all losses,
damages and expenses suffered or incurred that is caused by the negligence or
willful misconduct of the Custodian or any Subcustodian.
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9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or
any Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of any Fund Company as to which there
would be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of any such Fund Company, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such Fund Company in an amount sufficient to allow
the completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Instructions to make any payment or transfer of funds on behalf of any Fund
Company as to which it is subsequently determined that such Fund Company has
overdrawn its cash account with the Custodian as of the close of business on the
date of such payment or transfer, said overdraft shall constitute an Advance.
Any Advance shall be payable by the Fund Company on behalf of which the Advance
was made on demand by Custodian, unless otherwise agreed by such Fund Company
and the Custodian, and, as an overdraft charge, shall accrue interest from the
date of the Advance to the date of payment by such Fund Company to the Custodian
at a rate agreed upon in writing from time to time by the Custodian and such
Fund Company. It is understood that any transaction in respect of which the
Custodian shall have made an Advance, including but not limited to a foreign
exchange contract or transaction in respect of which the Custodian is not acting
as a principal, is for the account of and at the risk of the Fund Company on
behalf of which the Advance was made, and not, by reason of such Advance, deemed
to be a transaction undertaken by the Custodian for its own account and risk.
The Custodian and each of the Fund Companies that are parties to this Agreement
acknowledge that the purpose of Advances is to provide for the prompt delivery
in accordance with the settlement terms of such transactions or to meet
emergency expenses not reasonably foreseeable by a Fund Company. The Custodian
shall promptly notify the appropriate Fund Company of any Advance. Such
notification shall be sent by facsimile transmission or in such other manner as
such Fund Company and the Custodian may agree. The Custodian shall have a lien
on the property in the custody accounts, in an amount not greater than 110% of
the amount of an advance to secure payment of any such advance.
10. COMPENSATION.
IRC will pay to the Custodian such compensation as is agreed
to in writing by the Custodian and IRC from time to time. Such compensation,
together with all amounts for which the Custodian is to be reimbursed in
accordance with Section 7(e), shall be billed to IRC and paid in cash to the
Custodian.
11. POWERS OF ATTORNEY.
Upon request, each Fund shall deliver to the Custodian such
proxies, powers of attorney or other instruments as may be required in
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connection with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement.
12. TERMINATION AND ASSIGNMENT.
Any Fund Company or the Custodian may terminate this Agreement
by notice in writing, delivered or mailed, postage prepaid (certified mail,
return receipt requested) to the other not less than 60 days prior to the date
upon which such termination shall take effect. Upon termination of this
Agreement, IRC shall pay to the Custodian such fees as may be due the Custodian
hereunder as well as its reimbursable disbursements, costs and expenses paid or
incurred. Upon termination of this Agreement, the Custodian shall deliver, at
the terminating party's expense, all Assets held by it hereunder to the
appropriate Fund Company or as otherwise designated by such Fund Company by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any
Fund Company without the respective consent of the other, duly authorized by a
resolution by its Board of Directors or Trustees.
13. ADDITIONAL FUNDS.
Additional Fund Companies may become party to this Agreement
after the date hereof by an instrument in writing to such effect signed by such
Fund Company or Companies and the Custodian. If this Agreement is terminated as
to one or more of the Fund Companies (but less than all of the Fund Companies)
or if an additional Fund Company or Companies shall become a party to this
Agreement, there shall be delivered to each party an Appendix B or an amended
Appendix B, signed by each of the additional Fund Companies (if any) and each of
the remaining Fund Companies as well as the Custodian, deleting or adding such
Fund Company or Companies, as the case may be. The termination of this Agreement
as to less than all of the Fund Companies shall not affect the obligations of
the Custodian and the remaining Fund Companies hereunder as set forth on the
signature page hereto and in Appendix B as revised from time to time.
14. NOTICES.
As to IRC and each Fund Company, notices, requests,
instructions and other writings delivered to Investors Research Corporation,
4500 Main Street, Kansas City, Missouri 64111, Attention: General Counsel,
postage prepaid, or to such other address as any particular Fund Company may
have designated to the Custodian in writing, shall be deemed to have been
properly delivered or given to IRC and the Fund Companies.
Notices, requests, instructions and other writings delivered
to the Securities Administration Department of the Custodian at its office at
928
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Grand Avenue, Kansas City, Missouri, or mailed postage prepaid, to the
Custodian's Securities Administration Department, Post Office Box 226, Kansas
City, Missouri 64141, or to such other addresses as the Custodian may have
designated to each Fund Company in writing, shall be deemed to have been
properly delivered or given to the Custodian hereunder; provided, however, that
procedures for the delivery of Instructions and Special Instructions shall be
governed by Section 2(c) hereof.
15. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State
of Missouri and shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement
shall be binding upon, and inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended,
modified or waived, in any manner except in writing, properly executed by both
parties hereto; provided, however, Appendix A may be amended from time to time
as Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians, and
Securities Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions in this Agreement are included for
convenience of reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of
execution hereof.
(f) This Agreement may be executed simultaneously in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning
of this Agreement, and the definitions thereof are found in the following
sections of the Agreement:
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Term Section
Account 4(b)(3)(ii)
ADR's 4(j)
Advance 9
Assets 2
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2
Securities Depositories and
Clearing Agencies 5(b)
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2
Special Subcustodian 5(d)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement is held
to be illegal, in conflict with any law or otherwise invalid by any court of
competent jurisdiction, the remaining portion or portions shall be considered
severable and shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof, and
accordingly supersedes, as of the effective date of this Agreement, any
custodian agreement heretofore in effect between the Fund Companies and the
Custodian.
24
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IN WITNESS WHEREOF, the parties hereto have caused this Custody
Agreement to be executed by their respective duly authorized officers.
ATTEST: INVESTORS RESEARCH CORPORATION
By: /s/ William M. Lyons
Name: William M. Lyons
Title: Executive V.P. & General
Counsel
Date:
ATTEST: UMB BANK, N.A.
By: /s/ David Swan
Name: David Swan
Title: SVP
Date: 9-12-95
25
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APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRY FOREIGN SUBCUSTODIANS CENTRAL DEPOSITORY
Argentina Citibank Caja de Valores
Australia Australia and New Zealand Bank CHESS
Austria Creditanstalt Bankverein OKB
Bangladesh Standard Chartered Bank N/A
Belgium Banque Bruxelles Lambert CIK
Botswana Barclays Bank of Botswana N/A
Brazil Banco de Boston BOVESPA
Rio De Janeiro Stock
Exchange
Canada Toronto Dominion Bank CDS
Chile Citibank N.A. Depositorio Central
de Valores
China Hongkong & Shanghai Bank Corp.
Shenzhen Exchange: Citibank, N.A.
Standard Chartered Bank
Hongkong & Shanghai
Bank Corp.
Shanghai Exchange: Shanghai Exchange
Colombia Cititrust N/A
Czech Republic ING Bank SCP
Denmark Den Danske Bank VP
Finland Union Bank of Finland N/A
France Banque Indosuez SICOVAM
Germany BHF Bank DKV
Ghana Barclays Bank of Ghana N/A
Greece Citibank N.A. N/A
26
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Hong Kong Hongkong & Shanghai Bank Corp. CCASS
Hungary Euroclear (see Austria) OKB
Citibank Budapest KELER
India Standard Chartered Bank N/A
Indonesia Hongkong & Shanghai Bank Corp. N/A
Ireland Allied Irish Bank N/A
Israel Bank Leumi SECH
Italy Barclays Bank Monte Titoli S.p.A.
Japan Morgan Stanley International JASDEC
Mutual Fund Clients: Mitsubishi Bank Ltd.
Jordan Arab Bank ple N/A
Kenya Barclays Bank of Kenya N/A
Korea Standard Chartered Bank KCD
Luxembourg Euroclear/Bankque Bruxelles
Lambert N/A
Malaysia Oversea Chinese Banking Corp. MCD
Mauritius Hongkong & Shanghai Bank Corp. N/A
Mexico Citibank N.A. S.D. Indeval
Morocco Banque Commerciale du Maroc N/A
Netherlands ABN Amro Bank NECIGEF
New Zealand Australia and New Zealand Bank AUSTRACLEAR
Norway Den Norske Bank VPS
Pakistan Standard Chartered Bank SCD
Papua New Guinea Australia and New Zealand Bank N/A
(see Australia)
Peru Citibank N.A. Caja de Valores
Phillippines Hongkong & Shanghai Bank Corp. N/A
Poland Citibank S.A. NDS
Portugal Banco Comercial Portugues N/A
Singapore Oversea Chinese Banking Corp. CDP
South Africa First National Bank of Southern
Africa N/A
Spain Banco Santander SCLV
Sri Lanka Hongkong & Shanghai Bank Corp. CDS
Swaziland Barclays Bank of Swaziland N/A
Sweden Svenska Handelsbanken VPS
Switzerland Bank Leu SEGA
Taiwan Hongkong & Shanghai Bank Corp. TSCD
Thailand Standard Chartered Bank TSD
Turkey Citibank N.A. N/A
United Kingdom Barclays Bank PLC N/A
USA DTC DTC
Chemical Bank N/A
Uruguay Citibank N.A. N/A
Venezuela Citibank N.A. N/A
Zambia Barclays Bank of Zambia N/A
Zimbabwe Barclays Bank of Zimbabwe N/A
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Investors Research Corporation UMB Bank, n.a.
By: /s/ William M. Lyons By: /s/ David Swan
Name: Name: David Swan
Title: Title: SVP
Date: Date: 9-12-95
28
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APPENDIX B
CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are
hereby made parties to the Custody Agreement dated September 12, 1995, with UMB
Bank, n.a. ("Custodian") and Investors Research Corporation, and agree to be
bound by all the terms and conditions contained in said Agreement:
LIST OF FUNDS
Twentieth Century Growth Investors
Twentieth Century Select Investors
Twentieth Century Ultra Investors
Twentieth Century Vista Investors
Twentieth Century Giftrust Investors
Twentieth Century Heritage Investors
Twentieth Century Balanced Investors
Twentieth Century Equity Investors
Twentieth Century Value Investors
Twentieth Century International Equity Income
Twentieth Century International Emerging Growth
TCI Growth
TCI Balanced
TCI Advantage
TCI International
ATTEST: INVESTORS RESEARCH CORPORATION
By: /s/ William M. Lyons
Name:
Title:
Date:
29
<PAGE>
ATTEST: UMB BANK, N.A.
By: /s/ David Swan
Name: David Swan
Title: SVP
Date: 9-12-95
30
David H. Reinmiller
Attorney at Law
4500 Main Street * P.O. Box 418210
Kansas City, Missouri 64141-9210
January 15, 1996
TCI Portfolios, Inc.
Twentieth Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to TCI Portfolios, Inc. (the "Corporation"), I am generally
familiar with its affairs. Based upon this familiarity, and upon the examination
of such documents as I deemed relevant, it is my opinion that the shares of the
Corporation described in Post-Effective Amendment No. 17 to its Registration
Statement on Form N-1A, to be filed with the Securities and Exchange Commission
on January 16, 1996, will, when issued, be validly issued, fully paid and
nonassessable.
For the record, it should be stated that I am an officer of the Corporation
and an officer of Twentieth Century Services, Inc. an affiliated corporation of
Investors Research Corporation, the investment adviser of the Corporation.
I hereby consent to the use of this opinion as an exhibit to Post-
Effective Amendment No. 17.
Very truly yours,
/s/ David H. Reinmiller
David H. Reinmiller
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
TCI Portfolios, Inc.
Twentieth Century Tower
4500 Main Street
Kansas City, Missouri 64111
We hereby consent to the use in this Post-Effective Amendment No. 17 to the
Registration Statement under the Securities Act of 1933 and this Amendment No.
17 to the Registration Statement under the Investment Company Act of 1940, both
on form N-1A, of our report dated January 20, 1995, accompanying and pertaining
to the financial statements of TCI Growth, TCI Balanced, TCI Advantage and TCI
International, each a series of TCI Portfolios, Inc., as of December 31, 1994,
which are included in such Post-Effective Amendments.
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
January 15, 1996
SCHEDULE OF COMPUTATION OF PERFORMANCE ADVERTISING QUOTATIONS
Set forth below are representative calculations of each type of total
return performance quotation included in the Statement of Additional Information
of TCI Portfolios, Inc.
1. Average annual total return. The average one-year annual total
return of TCI Advantage as quoted in the Statement of Additional
Information, was 16.75%.
This return was calculated as follows:
P(1+T)n = ERV
where,
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 payment at the
end of the period.
Applying the actual return figures of the fund for the one year period
ended December 31, 1995.
1,000 (1+T)1 = $1,167.50
(1,167.50)1
T = ----------- - 1
(1,000)
T = 16.75%
2. Cumulative total return. The cumulative total return of TCI
Advantage from August 1, 1991 (inception) to December 31, 1995 as
quoted in the Statement of Additional Information, was 38.03%
This return was calculated as follows:
C = (ERV - P)P
where,
C = cumulative total return
P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of the hypothetical $1,000 payment at the
end of the period.
Applying the actual return figures of the fund for the period August 1,
1991 through December 31, 1995.
(1,380.30 - 1,000)
C = ------------------
1,000
C = 38.03%
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, TCI Portfolios,
Inc., hereinafter called the "Corporation", and certain directors and officers
of the Corporation, do hereby constitute and appoint James E. Stowers, Jr.,
James E. Stowers III, William M. Lyons, and Patrick A. Looby, and each of them
individually, their true and lawful attorneys and agents to take any and all
action and execute any and all instruments which said attorneys and agents may
deem necessary or advisable to enable the Corporation to comply with the
Securities Act of 1933 and/or the Investment Company Act of 1940, as amended,
and any rules, regulations, orders, or other requirements of the United States
Securities and Exchange Commission thereunder, in connection with the
registration under the Securities Act of 1933 and/or the Investment Company Act
of 1940, as amended, including specifically, but without limitation of the
foregoing, power and authority to sign the name of the Corporation in its behalf
and to affix its corporate seal, and to sign the names of each of such directors
and officers in their capacities as indicated, to any amendment or supplement to
the Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and/or the Investment Company Act of 1940, as
amended, and to any instruments or documents filed or to be filed as a part of
or in connection with such Registration Statement; and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the Corporation has caused this Power to be
executed by its duly authorized officers on this the 29th day of July, 1995.
TCI PORTOLIOS, INC.
By:/s/ James E. Stowers III
JAMES E. STOWERS III, President
SIGNATURE AND TITLE
/s/ James E. Stowers, Jr. /s/ Robert W. Doering, M.D.
JAMES E. STOWERS, JR. ROBERT W. DOERING, M.D.
Chairman, Director Director
Principal Executive Officer
/s/ James E. Stowers III /s/ Linsley L. Lundgaard
JAMES E. STOWERS III LINSLEY L. LUNDGAARD
President and Director Director
/s/ Robert T. Jackson /s/ Donald H. Pratt
ROBERT T. JACKSON DONALD H. PRATT
Executive Vice President, Director
Principal Financial Officer
/s/ Maryanne Roepke /s/ Lloyd T. Silver
MARYANNE ROEPKE LLOYD T. SILVER
Vice President and Treasurer, Director
Principal Accounting Officer
/s/ Thomas A. Brown /s/ M. Jeannine Strandjord
THOMAS A. BROWN M. JEANNINE STRANDJORD
Director Director
/s/ John M. Urie
JOHN M. URIE
Director
Attest:
By: /s/ Patrick A. Looby
Patrick A. Looby, Secretary
