As filed with the Securities and Exchange Commission on April 28, 1997
1933 Act File No. 33-14567; 1940 Act File No. 811-5188
- --------------------------------------------------------------------------------
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._20_ _X__
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X__
Amendment No._20_
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
--------------------------------------------
(Exact Name of Registrant as Specified in Charter)
American Century Tower, 4500 Main Street, Kansas City, MO 64111
----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 816-531-5575
James E. Stowers, III
American Century Tower, 4500 Main Street, Kansas City, MO 64111
----------------------------------------------------------------
(Name and address of Agent for service)
Approximate Date of Proposed Public Offering: May 1, 1996
It is proposed that this filing become effective:
____ immediately upon filing pursuant to paragraph (b) of Rule 485
_X__ on May 1, 1997, 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
____ on [date] pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the
fiscal year ended December 31, 1996, was filed on February 27, 1997.
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<PAGE>
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CROSS REFERENCE SHEET
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N-1A Item No. Location
------------- --------
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis N/A
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Investment Policies of
of Registrant the Funds; Shareholders of Variable
Portfolios; Other Investment
Practices, Their Characteristics
and Risks; Performance
Advertising; Distribution
of Fund Shares; Further
Information About
American Century
Item 5. Management of the Management
Fund
Item 6. Capital Stock and Further Information About
Other Securities American Century
Item 7. Purchase of Securities Share Price; Distributions
Being Offered
Item 8. Redemption Share Price
Item 9. Pending Legal N/A
Proceedings
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PART B
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information N/A
Item 13. Investment Objectives Selection of Investments;
and Policies Additional Investment Restrictions;
Futures Contracts; An Explanation of
Fixed Income Securities Ratings;
Short Sales; Portfolio Turnover;
Item 14. Management of the Officers and Directors;
Registrant Management;
Custodians
Item 15. Control Persons Capital Stock
and Principal
Holders of Securities
Item 16. Investment Advisory Management;
and Other Services Custodians
Item 17. Brokerage Allocation Brokerage;
Performance Advertising
Item 18. Capital Stock and Capital Stock
Other Securities
Item 19. Purchase, Redemption N/A
and Pricing of
Securities Being
Offered
Item 20. Tax Status N/A
Item 21. Underwriters N/A
Item 22. Calculation of Performance Advertising
Performance Data
Item 23. Financial Statements Financial Statements
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 1, 1997
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
VP Capital Appreciation
[front cover]
PROSPECTUS
MAY 1, 1997
VP Capital Appreciation
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Variable Portfolios offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. One of the funds, VP Capital Appreciation,
formerly known as TCI Growth, is described in this Prospectus. Its investment
objective is listed on page 2 of this Prospectus. The other funds are described
in separate prospectuses. You should consult the prospectus of the separate
account of the specific insurance product that accompanies this Prospectus to
see which series of Variable Portfolios are available for purchase for such
insurance product.
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.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference.
Additional information is included in the Statement of Additional
Information dated May 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy, without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0070
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY VP CAPITAL APPRECIATION
The investment objective of VP Capital Appreciation 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 is no assurance that the Fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund .............................2
Financial Highlights .........................................4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ..............................5
Shareholders of Variable Portfolios ..........................5
Other Investment Practices, Their Characteristics
and Risks ...............................................5
Repurchase Agreements ...............................5
Portfolio Lending ...................................6
Foreign Securities ..................................6
Forward Currency Exchange Contracts .................6
Derivative Securities ...............................7
Short Sales .........................................8
When-Issued Securities ..............................8
Rule 144A Securities ................................8
Performance Advertising ......................................8
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ..................................................10
Purchase and Redemption of Shares ...................10
When Share Price Is Determined ......................10
How Share Price Is Determined .......................10
Distributions ................................................11
Taxes ........................................................11
Management ...................................................11
Investment Management ...................................11
Code of Ethics ..........................................11
Transfer and Administrative Services ....................12
Distribution of Fund Shares ..................................12
Further Information About American Century ...................12
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
VP CAPITAL APPRECIATION
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended December 31, except as noted.
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset,
Beginning of Period ............$12.06 $9.21 $9.32 $8.47 $8.64 $6.16 $6.24 $5.11 $5.29 $5.00
Income From
Investment Operations
Net Investment
Income (Loss) ...............(.06)(2) (.02) .01 .03 .02 .04 .06 .06 .06 .07
Net Realized and
Unrealized Gain
(Loss) on Investment
Transactions ................(.40) 2.88 (.12) .84 (.14) 2.51 (.14) 1.41 (.18) .29
Total From
Investment Operations .......(.46) 2.86 (.11) .87 (.12) 2.55 (.08) 1.47 (.12) .36
Distributions
From Net Investment Income .. - (.011) (.001) (.023) (.052) (.07) - (.06) (.06) (.07)
From Net Realized Gains
on Investment Transactions .. (1.36) - - - (.003) - - (.28) - -
Total Distributions ......... (1.36) (.011) (.001) (.023) (.055) (.07) - (.34) (.06) (.07)
Net Asset Value,
End of Period ..................$10.24 $12.06 $9.21 $9.32 $8.47 $8.64 $6.16 $6.24 $5.11 $5.29
Total Return(3) .............(4.32%) 31.10% (1.17%) 10.30% (1.33%) 41.86% (1.24%) 28.70% (2.26%) 7.20%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .......1.00% .99% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net
Investment Income
(Loss) to Average
Net Assets ..................(.59%) (.23%) .11% .35% .32% .62% 1.46% 1.53% 1.95% 7.2%(4)
Portfolio Turnover Rate ..... 182% 147% 115% 87% 135% 182% 271% 228% 354% -
Average Commission
Paid per
Investment
Security Traded .............$.0326 $.0370 -(5) -(5) -(5) -(5) -(5) -(5) -(5) -(5)
Net Assets, End
of Period (in millions) .....$1,314 $1,461 $1,003 $756 $415 $256 $97 $35 $6 $.319
(1) November 20, 1987 (inception) through December 31, 1987.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
(5) Disclosure of average commission paid per investment security traded was
not required prior to the year ended December 31, 1995.
</TABLE>
4 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
American Century Variable 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 identified on page 2 of this Prospectus, and any other investment
policies designated as "fundamental" in this Prospectus or in the Statement of
Additional Information, cannot be changed without shareholder approval. The fund
has implemented additional investment policies and practices to guide its
activities in the pursuit of its investment objective. These policies and
practices, which are described throughout this Prospectus, are not designated as
fundamental policies and may be changed without shareholder approval.
The investment objective of VP Capital Appreciation 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 VARIABLE PORTFOLIOS
Variable Portfolios will offer its shares only to insurance companies for
the purpose of funding variable annuity or variable life insurance contracts.
Although Variable 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 Variable Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, Variable 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 PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, 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 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
Prospectus Information Regarding the Fund 5
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 shareholders.
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
("DRs") for foreign securities. DRs are securities listed on exchanges or quoted
in the over-the-counter markets in one country but represent shares of issuers
domiciled in another country. DRs may be sponsored or unsponsored. Direct
investments in foreign securities may be made either on foreign securities
exchanges or in the over-the-counter markets.
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 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 U.S. dollar
may be an important factor in the overall performance of the fund.
To protect against adverse movements in exchange rates between currencies,
the fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into foreign currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose
6 Information Regarding the Fund American Century Investments
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 its portfolio securities or other assets
denominated in, or whose value is tied to, that currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the fund will enter
into portfolio hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund,
when required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of the
fund's assets will be committed to a segregated account in connection with
portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the fund against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationship between the foreign currency and the U.S. dollar.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund
may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured securities." Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as DRs), currencies, interest rates, indexes or other financial indicators
("reference indexes"). 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
limited to the price of oil would not be a permissible investment because the
fund may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or the instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
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 the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Prospectus Information Regarding the Fund 7
Board will review the manager'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. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns
at a current attractive price, but also wishes to defer recognition of gain or
loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code and Regulations.
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, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
criteria for selection. Rule 144A securites are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the Board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the Board 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
fund's Board of Directors 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, the fund's manager will consider appropriate remedies to
minimize the effect on the fund's liquidity. The fund may not invest more than
15% of its assets in illiquid securities (securities that may not be sold within
seven days at approximately the price used in determining the net asset value of
fund shares.)
PERFORMANCE ADVERTISING
From time to time the fund (or the insurance companies that use the fund 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 compound return over a stated period of time that would
have produced the fund's cumulative total return over
8 Information Regarding the Fund American Century Investments
the same period if the fund's performance had remained constant throughout.
The fund may also include in advertisements data comparing performance with
the performance of non-related investment media, published editorial comments
and performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be 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 2 1/2 -year CD
rates. Fund performance also may be compared to the rankings prepared by Lipper
Analytical Services, Inc. Fund performance also may be compared, on a relative
basis, to other funds in our fund family. This relative comparison, which may be
based upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numberically, graphically or in text.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Performance figures advertised by the fund 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.
Prospectus Information Regarding the Fund 9
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 separate account.
Shares of the fund are sold and redeemed by the fund 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 VP Capital Appreciation shares is also referred to as their
net asset value. Net asset value is determined by calculating the total value of
the fund's assets, deducting total liabilities and dividing the result by the
number of shares outstanding. Net asset value is determined at the close of
regular trading on each day that the New York Stock Exchange is open.
Investments and requests to redeem shares received by the separate account
before the close of business of the Exchange, usually 3 p.m. Central time, are
effective, and will receive the price determined, that day as of the close of
the Exchange. Investment, redemption and exchange requests received thereafter
are effective on, and receive the price determined as of the close of the
Exchange on, the next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic stock exchange are valued at the latest sale price on that
exchange. Portfolio securities primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on the
exchange where primarily traded. If no sale is reported, or if local convention
or regulation so provides, the mean of the latest bid and asked prices is used.
Depending on local convention or regulation, securities traded over the counter
are priced at the mean of the latest bid and asked prices, or at the last sale
price. When market quotations are not readily available, securities and other
assets are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business 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 that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which the fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices
10 Additional Information You Should Know American Century Investments
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
In general, distributions from net investment income and net realized
securities gains, if any, are declared and paid once a year, but the fund may
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act. All distributions from the
fund will be reinvested in additional shares.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means to the extent its income is distributed to shareholders, it
pays no income tax. For a discussion of the tax status of your variable
contract, refer to the prospectus of your insurance company separate account.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc. serves as the investment manager of the
fund. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional investors since it
was founded in 1958.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the fund's portfolio as 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 VP Capital Appreciation team and their
work experience for the last five years are as follows:
Glenn A. Fogle, Vice President and Portfolio Manager, joined American
Century in September 1990 as an Investment Analyst, a position he held until
March 1993. At that time, he was promoted to Portfolio Manager.
John D. Seitzer, Portfolio Manager, joined American Century in June 1993 as
an Investment Analyst, a position he held until July 1996. At that time he was
promoted to Portfolio Manager. Prior to joining American Century, Mr. Seitzer
attended Indiana University from August 1991 to June 1993, where he obtained his
MBA degree.
The activities of the manager are subject only to directions of the fund's
Board of Directors. The manager pays all the expenses of the fund except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager receives an annual fee
of 1% of the average net assets of the fund. On the first business day of each
month, each series of shares pays a management fee to the manager for the
previous month at the rate specified. The fee for the previous month is
calculated by multiplying the applicable fee for such series by the aggregate
average daily closing value of the series' net assets during the previous month,
and further multiplying that product by a fraction, the numerator of which is
the number of days in the previous month and the denominator of which is 365
(366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits acquisi-
Prospectus Additional Information You Should Know 11
tion of securities in an initial public offering, as well as profits derived
from the purchase and sale of the same security within 60 calendar days. These
provisions are designed to ensure that the interests of fund shareholders come
before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend paying agent for the fund.
It provides facilities, equipment and personnel to the fund and is paid for such
services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by the insurance company that
purchases the fund's shares, and the manager may pay the insurance company for
such services.
The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., chairman of the fund's Board of
Directors, controls American Century Companies by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the fund's investment
manager. The manager pays all expenses for promoting sales of, and distributing
the shares offered by this Prospectus.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Variable Portfolios, Inc., the issuer of the fund, 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 the fund is American Century Tower, 4500 Main
Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be
made by mail to that address or by telephone to 816-531-5575.
American Century Variable Portfolios, Inc. issues five series of common
stock with a par value of $.01 per share. Each series is commonly referred to as
a fund. The assets belonging to each series of shares are held separately by the
custodian. Each share 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 for those
matters which must be voted on separately by the series of shares affected.
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 votes cast in an election of directors can elect all of the
directors if they choose to do so, and, in such event, the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
An insurance company issuing a variable contract invested in shares issued
by the fund 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 the fund,
shareholders of each series of shares shall be entitled to receive, pro rata,
all of the assets less the liabilities of that series.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
12 Additional Information You Should Know American Century Investments
NOTES
Notes 13
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
Fax: 816-340-4360
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9704 [recycled logo]
SH-BKT-7780 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 1, 1997
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
VP Value
[front cover]
PROSPECTUS
MAY 1, 1997
VP Value
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Variable Portfolios offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. One of the funds, VP Value, is described in
this Prospectus. Its investment objective is listed on page 2 of this
Prospectus. The other funds are described in separate prospectuses. You should
consult the prospectus of the separate account of the specific insurance product
that accompanies this Prospectus to see which series of Variable Portfolios are
available for purchase for such insurance product.
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.
This Prospectus gives you information about the fund that you should know before
investing. Please read this Prospectus carefully and retain it for future
reference.
Additional information is included in the Statement of Additional Information
dated May 1, 1997, and filed with the Securities and Exchange Commission. It is
incorporated into this Prospectus by reference. To obtain a copy without charge,
call or write:
American Century Investments
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0070
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY VP VALUE
The investment objective of VP 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 is no assurance that the Fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund...............................................2
Financial Highlights...........................................................4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund................................................5
Shareholders of Variable Portfolios............................................6
Other Investment Practices, Their Characteristics
and Risks....................................................................6
Foreign Securities........................................................6
Equity Securities.........................................................6
Forward Currency Exchange Contracts.......................................7
Portfolio Turnover........................................................7
Repurchase Agreements.....................................................8
Index Futures Contracts...................................................8
Derivative Securities.....................................................9
Portfolio Lending.........................................................9
When-Issued Securities....................................................9
Short Sales..............................................................10
Rule 144A Securities.....................................................10
Performance Advertising.......................................................10
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price...................................................................12
Purchase and Redemption of Shares........................................12
When Share Price is Determined...........................................12
How Share Price is Determined............................................12
Distributions.................................................................13
Taxes.........................................................................13
Management....................................................................13
Investment Management....................................................13
Code of Ethics...........................................................13
Transfer and Administrative Services.....................................14
Distribution of Fund Shares...................................................14
Further Information About American Century....................................14
Prospectus Table of Contents 3
FINANCIAL HIGHLIGHTS
VP VALUE
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended December 31, except as noted.
1996(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period................................... $5.00
------
Income From Investment Operations
Net Investment Income............................................. .05
Net Realized and Unrealized Gain on Investment Transactions....... .56
------
Total From Investment Operations.................................. .61
------
Distributions
From Net Investment Income........................................ (.03)
------
Net Asset Value, End of Period......................................... $5.58
======
Total Return(2)................................................... 12.28%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets(3).............. 1.00%
Ratio of Net Investment Income to Average Net Assets(3)........... 1.98%
Portfolio Turnover Rate........................................... 49%
Average Commission Paid per Investment Security Traded............ $.0271
Net Assets, End of Period (in thousands).......................... $23,894
(1) May 1, 1996 (inception) through December 31, 1996.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total return is not annualized.
(3) Annualized.
4 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
American Century Variable Portfolios, Inc. 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 identified on page 2 of this Prospectus, and any other investment
policies designated as "fundamental" in this Prospectus or in the Statement of
Additional Information, cannot be changed without shareholder approval. The fund
has implemented additional investment policies and practices to guide its
activities in the pursuit of its investment objective. These policies and
practices, which are described throughout this Prospectus, are not designated as
fundamental policies and may be changed without shareholder approval.
The investment objective of VP 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, which includes equity equivalents (see "Other Investment Practices,
Their Characteristics and Risks -- Equity Securities," page 6). The fund's
investments will typically be characterized by lower price-to-earnings,
price-to-cash flow, price-to-debt adjusted 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 Practices, Their Characteristics and Risks --
Equity Securities," page 6), 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, 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
securities that
Prospectus Information Regarding The Fund 5
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 VARIABLE PORTFOLIOS
Variable Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although Variable 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 Variable Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, Variable 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 PRACTICES, THEIR CHARACTERISTICS AND RISKS
For additional information, 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 agencies,
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 listed on
exchanges or quoted in the over-the-counter markets in one country but represent
shares of issuers domiciled in another country. DRs may be sponsored or
unsponsored. Direct investments in foreign securities may be made either on
foreign securities exchanges or in the over-the-counter markets.
Subject to 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 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
6 Information Regarding the Fund American Century Investments
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," in 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. Depository receipts are an example of the type
of derivative security in which the fund might invest.
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
U.S. 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 U.S. dollar, the fund may enter into forward currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where the fund would be obligated to deliver an
amount of foreign currency in excess of the aggregate value of its portfolio
securities or other assets denominated in, or whose value is tied to, that
currency.
The fund will make use of portfolio hedging to the extent deemed appropriate by
the manager. However, it is anticipated that the fund will enter into portfolio
hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of 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
The total portfolio turnover rate of the fund is shown in the Financial
Highlights table on page 4 of this Prospectus.
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objectives.
The manager believes that the rate of portfolio turnover is irrelevant when it
determines a change is in order to achieve those objectives and accordingly, the
annual portfolio turnover rate cannot be accurately predicted.
Prospectus Information Regarding the Fund 7
The portfolio turnover of the fund may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost that the fund pays directly.
Portfolio turnover may also affect the character of capital gains, if any,
realized and distributed by the fund since short-term capital gains are taxable
as ordinary income.
REPURCHASE AGREEMENTS
The fund may invest 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, 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 sell it back on a specified
date in the future at an agreed-upon price. The repurchase price reflects an
agreed-upon interest rate during the time the fund's money is invested in the
security.
Since the security purchased constitutes security for the repurchase obligation,
a repurchase agreement can be considered a loan collateralized by the security
purchased.
The fund's risk is the ability of the seller to pay the agreed-upon repurchase
price on the repurchase date. If the seller defaults, the fund may incur costs
in disposing of the collateral, which would reduce the amount realized thereon.
If the seller seeks relief under the bankruptcy laws, the disposition of the
collateral may be delayed or limited. To the extent the value of the security
decreases, the fund could experience a loss.
The fund will not invest more than 15% of its assets in repurchase agreements
maturing in more than seven days.
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 manager 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 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.
8 Information Regarding the Fund American Century Investments
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund may
invest in securities that are commonly referred to as "derivative" securities.
Generally, a derivative is a financial arrangement the value of which is based
on, or "derived" from, a traditional security, asset, or market index. Certain
derivative securities are more accurately described as "index/structured"
securities. Index/structured securities are derivative securities whose value or
performance is linked to other equity securities (such as 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 price of oil would not be a permissible investment because the
fund may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or the instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
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 value (or referenced value) exceeds the available cash of the
fund.
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 the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the Board will
review the manager's policy for investments in derivative securities annually.
PORTFOLIO LENDING
In order to realize additional income, the fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets valued at market. The portfolio
lending policy described in this paragraph is fundamental policy that may be
changed only by a vote of a majority of fund shareholders.
WHEN-ISSUED SECURITIES
The fund may sometimes purchase new issues of securities on a when-issued basis
without limit when, in the opinion of the manager, such purchases will further
the investment objectives of the fund. The price of when-issued securities is
established at the time the commitment to purchase is made. Delivery
Prospectus Information Regarding the Fund 9
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 and
Regulations.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they present
attractive investment opportunities that otherwise meet the fund's criteria for
selection. Rule 144A securities are securities that are privately placed with
and traded among qualified institutional investors rather than the general
public. Although Rule 144A securities are considered "restricted securities,"
they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission has taken the position that the liquidity of
such securities in the portfolio of a fund offering redeemable securities is a
question of fact for the Board of Directors to determine, such determination to
be based upon a consideration of the readily available trading markets and the
review of any contractual restrictions. The staff also acknowledges that, while
the Board retains ultimate responsibility, it may delegate this function to the
manager. Accordingly, the Board has established guidelines and procedures for
determining the liquidity of Rule 144A securities and has delegated the
day-to-day function of determining the liquidity of Rule 144A securities to the
manager. The Board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities will be limited to certain
qualified institutional investors, the liquidity of such securities may be
limited accordingly and a fund may from time to time hold a Rule 144A security
that is illiquid. In such an event, the fund's manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. 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).
PERFORMANCE ADVERTISING
From time to time the fund (or the insurance companies that use the fund 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 compound return over a stated period of time that would have produced
the fund's cumulative total return over the same period if the fund's
performance had remained constant throughout.
The fund may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services) 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
10 Information Regarding the Fund American Century Investments
of market performance, including the Standard & Poor's 500 Index, the Dow Jones
Industrial Average and The S&P/Barra Value Index. Fund performance also may be
compared to the rankings prepared by Lipper Analytical Services, Inc. Fund
performance also may be compared, on a relative basis, to other funds in our
fund family. This relative comparison, which may be based upon historical or
expected fund performance, volatility or other fund characteristics, may be
presented numerically, graphically or in text.
All performance information advertised by the fund is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Performance figures advertised by the fund 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.
Prospectus Information Regarding the Fund 11
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 separate account.
Shares of the fund are sold and redeemed by the fund 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 VP Value shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of the fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. Net asset value is determined at the close of regular trading on
each day that the New York Stock Exchange is open. Investments and requests to
redeem shares received by the separate account before the close of business of
the Exchange, usually 3 p.m. Central time, are effective, and will receive the
price determined, that day as of the close of the Exchange. Investment,
redemption and exchange requests received thereafter are effective on, and
receive the price determined as of the close of the Exchange on, the next day
the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic stock exchange are valued at the latest sale price on that
exchange. Portfolio securities primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on the
exchange where primarily traded. If no sale is reported, or if local convention
or regulation so provides, the mean of the latest bid and asked prices is used.
Depending on local convention or regulation, securities traded over the counter
are priced at the mean of the latest bid and asked prices, or at the last sale
price. When market quotations are not readily available, securities and other
assets are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business 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 that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock Exchange
is not open and on which the fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices
12 Additional Information You Should Know American Century Investments
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
In general, distributions from net investment income and net realized securities
gains, if any, are declared and paid once a year, but the fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act. All distributions from the
fund will be reinvested in additional shares.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means to the extent its income is distributed to shareholders, it
pays no income tax. For a discussion of the tax status of your variable
contract, refer to the prospectus of your insurance company separate account.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the fund. Acting pursuant to an
investment management agreement entered into with the fund, American Century
Investment Management, Inc. serves as the manager of the fund. Its principal
place of business is American Century Tower, 4500 Main Street, Kansas City,
Missouri 64111.
The manager has been providing investment advisory services to investment
companies and institutional investors since it was founded in 1958.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the fund's portfolio as 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 VP Value team and their work experience for
the last five years are as follows:
PETER A. ZUGER, Vice President and Portfolio Manager, joined American Century
in June 1993 as a Portfolio Manager. Prior to joining American Century, 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 American
Century in September 1993 as a Portfolio Manager. Prior to joining American
Century, Mr. Davidson served as an investment manager for Boatmen's Trust
Company in St. Louis, Missouri.
The activities of the manager are subject only to directions of the fund's Board
of Directors. The manager pays all the expenses of the fund except brokerage,
taxes, interest, fees, expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager receives an annual fee of
1.00% of the average net assets of the fund. On the first business day of each
month, each series of shares pays a management fee to the manager for the
previous month at the rate specified. The fee for the previous month is
calculated by multiplying the applicable fee for such series by the aggregate
average daily closing value of the series' net assets during the previous month,
and further multiplying that product by a fraction, the numerator of which is
the number of days in the previous month and the denominator of which is 365
(366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well
Prospectus Additional Information You Should Know 13
as profits derived from the purchase and sale of the same security within 60
calendar days. These provisions are designed to ensure that the interests of
fund shareholders come before the interests of the people who manage those
funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend paying agent for the fund. It
provides facilities, equipment and personnel to the fund and is paid for such
services by the manager. Certain administrative and recordkeeping services that
would otherwise be performed by the transfer agent may be performed by the
insurance company that purchases the fund's shares, and the manager may pay the
insurance company for such services.
The manager and the transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., chairman of the fund's Board of Directors,
controls American Century Companies, Inc. by virtue of his voting control of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services, Inc.,
a registered broker-dealer and an affiliate of the fund's investment manager.
The manager pays all expenses for promoting sales of, and distributing the
shares offered by this Prospectus.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Variable Portfolios, Inc., the issuer of the fund, 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 the fund 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 telephone to 816-531-5575.
American Century Variable Portfolios, Inc. issues five series of common stock
with a par value of $.01 per share. Each series is commonly known as a fund. The
assets belonging to each series of shares are held separately by the custodian.
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 for those
matters which must be voted on separately by the series of shares affected.
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 votes cast in an election of directors can elect all of the directors
if they choose to do so, and, in such event, the holders of the remaining votes
will not be able to elect any person or persons to the Board of Directors.
An insurance company issuing a variable contract invested in shares issued by
the fund 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 the fund,
shareholders of each series of shares shall be entitled to receive, pro rata,
all of the assets less the liabilities of that series.
We reserve the right to change any of our policies, practices and procedures
described in this prospectus, including the Statement of Additional Information,
without shareholder approval except in those instances where shareholder
approval is expressly required.
14 Additional Information You Should Know American Century Investments
NOTES
Notes 15
NOTES
16 Notes
NOTES
Notes 17
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
Fax: 816-340-4360
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7779 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 1, 1997
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
VP Balanced
[front cover]
PROSPECTUS
MAY 1, 1997
VP Balanced
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Variable Portfolios offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. One of the funds, VP Balanced, is described
in this Prospectus. Its investment objective is listed on page 2 of this
Prospectus. The other funds are described in separate prospectuses. You should
consult the prospectus of the separate account of the specific insurance product
that accompanies this Prospectus to see which series of Variable Portfolios are
available for such insurance product.
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.
This Prospectus gives you information about the fund that you should know before
investing. Please read this Prospectus carefully and retain it for future
reference.
Additional information is included in the Statement of Additional Information
dated May 1, 1997, and filed with the Securities and Exchange Commission. It is
incorporated into this Prospectus by reference. To obtain a copy without charge,
call or write:
American Century Investments
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0070
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY VP BALANCED
The investment objective of VP Balanced is capital growth and current income.
The fund will seek to achieve its investment objective by maintaining
approximately 60% of the assets of VP 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 is no assurance that the Fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund............................................2
Financial Highlights........................................................4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund.............................................5
Shareholders of Variable Portfolios.........................................6
Other Investment Practices, Their Characteristics
and Risks.................................................................6
Fundamentals of Fixed Income Investing.................................6
Repurchase Agreements..................................................7
Portfolio Lending......................................................7
Foreign Securities.....................................................7
Forward Currency Exchange Contracts....................................8
Derivative Securities..................................................8
Short Sales............................................................9
When-Issued Securities.................................................9
Rule 144A Securities..................................................10
Performance Advertising....................................................10
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price................................................................12
Purchase and Redemption of Shares.....................................12
When Share Price Is Determined........................................12
How Share Price Is Determined.........................................12
Distributions..............................................................13
Taxes......................................................................13
Management.................................................................13
Investment Management.................................................13
Code of Ethics........................................................14
Transfer and Administrative Services..................................14
Distribution of Fund Shares................................................14
Further Information About American Century.................................14
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
VP BALANCED
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
thereon appears in the fund's annual report, which is incorporated by reference
into the Statement of Additional Information. The annual report contains
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended December 31, except as noted.
1996 1995 1994 1993 1992 1991(1)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period............................ $7.04 $5.96 $6.07 $5.74 $6.19 $5.00
Income From Investment Operations
Net Investment Income .................... .18(2) .17 .15 .11 .08 .08
Net Realized and Unrealized Gain
(Loss) on Investment Transactions......... .65 1.08 (.11) .33 (.45) 1.19
Total From Investment Operations.......... .83 1.25 .04 .44 (.37) 1.27
Distributions
From Net Investment Income................ (.13) (.17) (.15) (.11) (.08) (.08)
From Net Realized Gains
on Investment Transactions................ (.20) - - - - -
Total Distributions....................... (.33) (.17) (.15) (.11) (.08) (.08)
Net Asset Value, End of Period................. $7.54 $7.04 $5.96 $6.07 $5.74 $6.19
Total Return(3)........................... 12.21% 21.12% .61% 7.68% (6.04%) 38.02%(4)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets.......................... .99% .97% 1.00% 1.00% 1.00% 1.00%(4)
Ratio of Net Investment Income
to Average Net Assets.......................... 2.43% 2.69% 2.49% 1.97% 1.91% 2.36%(4)
Portfolio Turnover Rate........................ 130% 87% 63% 68% 85% 28%
Average Commission Paid per
Investment Security Traded..................... $.0373 $.0400 -(5) -(5) -(5) -(5)
Net Assets, End
of Period (in thousands).......................$215,393 $153,823 $105,100 $75,924 $34,382 $1,412
(1) May 1, 1991 (inception) through December 31, 1991.
(2) Computed using average shares outstanding for the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(4) Annualized.
(5) Disclosure of average commission paid per investment security traded was
not required prior to the year ended December 31, 1995.
</TABLE>
4 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
American Century Variable Portfolios, Inc. 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 identified on page 2 of this Prospectus, and any other investment
policies designated as "fundamental" in this Prospectus or in the Statement of
Additional Information, cannot be changed without shareholder approval. The fund
has implemented additional investment policies and practices to guide its
activities in the pursuit of its investment objective. These policies and
practices, which are described throughout this Prospectus, are not designated as
fundamental policies and may be changed without shareholder approval.
The investment objective of VP 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 the fund's assets in fixed income
senior securities. The fixed income securities in the fund will be chosen based
on their level of income production and price stability. The fund may invest in
a diversified portfolio of debt and other fixed-rate securities payable in
United States currency. These may include obligations of the United States
government, its agencies and instrumentalities, corporate securities (bonds,
notes, preferred and convertible issues), and sovereign government, municipal,
mortgage-backed and other asset-backed securities.
The government securities in which the fund may invest include: (1) direct
obligations of the United States, such as Treasury bills, notes and bonds, which
are supported by the full faith and credit of the United States, and (2)
obligations (including mortgage-backed securities) issued or guaranteed by
agencies and instrumentalities of the United States government that are
established under an act of Congress. The securities of some of these agencies
and instrumentalities, such as the Government National Mortgage Association, are
guaranteed as to principal and interest by the U.S. Treasury, and other
securities are supported by the right of the issuer, such as the Federal Home
Loan Banks, to borrow from the Treasury. Other obligations, including those
issued by the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
Mortgage-backed securities in which the fund may invest include collateralized
mortgage obligations ("CMOs") issued by a United States agency or
instrumentality. A CMO is a debt security that is collateralized by a portfolio
or pool of mortgages or mortgage-backed securities. The issuer's obligation to
make interest and principal payments is secured by the underlying pool or
portfolio of mortgages or securities.
The market value of mortgage-backed securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of principal
and interest by the U.S. government, is not insured. When interest rates rise,
the market value of those
Prospectus Information Regarding the Fund 5
securities may decrease in the same manner as other debt, but when interest
rates decline, their market value may not increase as much as other debt
instruments because of the prepayment feature inherent in the underlying
mortgages. If such securities are purchased at a premium, the fund will suffer a
loss if the obligation is prepaid. Prepayments will be reinvested at prevailing
rates, which may be less than the rate paid by the prepaid obligation.
For the purpose of determining the weighted average portfolio maturity of the
fund, the manager shall consider the maturity of a mortgage-backed 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 underlying mortgages, especially in a
declining interest rate environment. In determining the remaining expected
average life, the manager makes assumptions regarding prepayments on underlying
mortgages. In a rising interest rate environment, those prepayments generally
decrease, and may decrease below the rate of prepayment assumed by the manager
when purchasing those securities. Such slowdown may cause the remaining maturity
of those securities to lengthen, which will increase the relative volatility of
those securities and, hence, the fund holding the securities. See "Fundamentals
of Fixed Income Investing," this page.
It is the manager's intention to invest the fund's fixed income holdings in
high-grade securities. At least 80% of fixed income assets will be invested in
securities 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 in
the fourth highest category (Baa by Moody's or BBB by S&P) or, if not rated, are
of equivalent investment quality as determined by the manager and that, in the
opinion of the manager, can contribute meaningfully to the fund's results
without compromising its objectives. Such issues might include a lower-rated
issue where research suggests the likelihood of a rating increase or a
convertible issue of a company deemed attractive by the equity management team.
For a brief discussion of fixed income investing, see "Fundamentals of Fixed
Income Investing" this page.
There are no maturity restrictions on the securities in which the fund invests.
Under normal market conditions the weighted average portfolio maturity for the
fixed income portfolio will be in the three- to 10-year range. The manager will
actively manage the portfolio, adjusting the weighted average portfolio maturity
in response to expected changes in interest rates. During periods of rising
interest rates, a shorter-weighted average maturity may be adopted in order to
reduce the effect of bond price declines on the fund's net asset value. When
interest rates are falling and bond prices rising, a longer-weighted average
portfolio maturity may be adopted.
SHAREHOLDERS OF VARIABLE PORTFOLIOS
Variable Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although Variable 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 Variable Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Conse-quently, Variable 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 PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, 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
6 Information Regarding the Fund American Century Investments
prices of bonds and other securities that trade on a yield basis rise. On the
other hand, when prevailing interest rates rise, bond prices fall.
Generally, the longer the maturity of a debt security, the higher its yield and
the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds, to change. If sustained
over time, it would also have the impact of raising or lowering the yield of
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 tend to 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 like 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 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 manager 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 fund shareholders.
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
("DRs") for foreign securities. DRs are securities listed on exchanges or quoted
in the over-the-counter
Prospectus Information Regarding the Fund 7
markets in one country but represent shares of issuers domiciled in another
country. DRs may be sponsored or unsponsored. Direct investments in foreign
securities may be made either on foreign securities exchanges or in the
over-the-counter market.
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 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 U.S. dollar
may be an important factor in the overall performance of the fund.
To protect against adverse movements in exchange rates between currencies, the
fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into foreign currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where the fund would be obligated to deliver an
amount of foreign currency in excess of the aggregate value of its portfolio
securities or other assets denominated in, or whose value is tied to, that
currency.
The fund will make use of portfolio hedging to the extent deemed appropriate by
the manager. However, it is anticipated that the fund will enter into portfolio
hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of the
fund's assets will be committed to a segregated account in connection with
portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and there
is no assurance that any attempt to protect the fund against adverse currency
movements through the use of forward currency exchange contracts will be
successful. In addition, the use of forward currency exchange contracts tends to
limit the potential gains that might result from a positive change in the
relationship between the foreign currency and the U.S. dollar.
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" securi-
8 Information Regarding the Fund American Century Investments
ties. Generally, a derivative is a financial arrangement the value of which is
based on, or "derived" from, a traditional security asset, or market index.
Certain derivative securities are more accurately described as "index/structured
securities." Index/structured securities are derivative securities whose value
or performance is linked to other equity securities (such as DRs), currencies,
interest rates, indexes or other financial indicators ("reference indexes"). 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 price of oil
would not be a permissible investment because the fund may not invest in oil and
gas leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or the instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
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 the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the Board will
review the manager's policy for investments in derivative securities annually.
SHORT SALES
The fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns at a
current attractive price but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code and
Regulations.
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.
Prospectus Information Regarding the Fund 9
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they present
attractive investment opportunities that otherwise meet the fund's criteria for
selection. Rule 144A securities are securities that are privately placed with
and traded among qualified institutional investors rather than the general
public. Although Rule 144A securities are considered "restricted" securities
they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission has taken the position that the liquidity of
such securities in the portfolio of a fund offering redeemable securities is a
question of fact for the Board of Directors to determine, such determination to
be based upon a consideration of the readily available trading markets and the
review of any contractual restrictions. The staff also acknowledges that, while
the Board retains ultimate responsibility, it may delegate this function to the
manager. Accordingly, the Board has established guidelines and procedures for
determining the liquidity of Rule 144A securities and has delegated the
day-to-day function of determining the liquidity of Rule 144A securities to the
manager. The Board retains the responsibility to monitor the implementation of
the guidelines and procedures it has adopted.
Since the secondary market for such securities 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, the fund's manager will consider appropriate remedies to
minimize the effect on the fund's liquidity. 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).
PERFORMANCE ADVERTISING
From time to time, the fund (or the insurance companies that use the fund 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, 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 compound return over a stated period of time that would have produced
the fund's cumulative total return over the same period if the fund's
performance had remained constant throughout.
A quotation of yield reflects 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 SEC rules for all stock and bond funds. Because yield accounting
methods differ from the methods used for other accounting purposes, the fund's
yield may not equal income paid on your shares or the income reported in the
fund's financial statements.
The fund may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be 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 also may be
compared to the rankings
10 Information Regarding the Fund American Century Investments
prepared by Lipper Analytical Services, Inc. Fund performance also may be
compared, on a relative basis, to other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text.
All performance information advertised by the fund is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Performance figures advertised by the fund 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.
Prospectus Information Regarding the Fund 11
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 separate account.
Shares of the fund are sold and redeemed by the fund 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 VP Balanced shares is also referred to as their net asset value.
Net asset value is determined by calculating the total value of the fund's
assets, deducting total liabilities and dividing the result by the number of
shares outstanding. Net asset value is determined at the close of regular
trading on each day that the New York Stock Exchange is open. Investments and
requests to redeem shares received by the separate account before the close of
business of the Exchange, usually 3 p.m. Central time, are effective, and will
receive the price determined that day as of the close of the Exchange.
Investment, redemption and exchange requests received thereafter are effective
on, and receive the price determined as of the close of the Exchange on, the
next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic stock exchange are valued at the latest sale price on that
exchange. Portfolio securities primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on the
exchange where primarily traded. If no sale is reported, or if local convention
or regulation so provides, the mean of the latest bid and asked prices is used.
Depending on local convention or regulation, securities traded over the counter
are priced at the mean of the latest bid and ask prices, or at the last sale
price. When market quotations are not readily available, securities and other
assets are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures adopted by the Board of Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business 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 that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock Exchange
is not open and on which the fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices
12 Additional Information You Should Know American Century Investments
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
In general, distributions from net investment income and net realized securities
gains, if any, are declared and paid once a year, but the fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code, in all events in a manner consistent
with the provisions of the Investment Company Act. All distributions from the
fund will be reinvested in additional shares.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means to the extent its income is distributed to shareholders, it
pays no income tax. For a discussion of the tax status of your variable
contract, refer to the prospectus of your insurance company's separate account.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the fund. Acting pursuant to an
investment management agreement entered into with the fund, American Century
Investment Management, Inc. serves as the manager of the fund. Its principal
place of business is American Century Tower, 4500 Main Street, Kansas City,
Missouri 64111. The manager has been providing investment advisory services to
investment companies and institutional investors since it was founded in 1958.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the fund's portfolio as 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 VP Balanced team and their work experience
for the last five years are as follows:
CHARLES M. DUBOC, Senior Vice President and Portfolio Manager, joined American
Century in August 1985 and served as fixed income Portfolio Manager from that
time until April 1993. In April 1993, Mr. Duboc joined American Century's equity
investment efforts. He is a member of the team that manages the equity portion
of VP Balanced.
NORMAN E. HOOPS, Senior Vice President and fixed income Portfolio Manager,
joined American Century as Vice President and Portfolio Manager in November
1989. In April 1993, he became Senior Vice President. He manages the fixed
income portion of VP Balanced.
NANCY B. PRIAL, Vice President and Portfolio Manager, joined American Century in
February 1994 as a Portfolio Manager. She is a member of the team that manages
the equity portion of VP Balanced. For more than four years prior to joining
American Century, Ms. Prial served as Senior Vice President and Portfolio
Manager at Frontier Capital Management Company, Boston, Massachusetts.
The activities of the manager are subject only to directions of the fund's Board
of Directors. The manager pays all the expenses of the fund except brokerage,
taxes, interest, fees and expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager receives an annual fee of 1%
of the average net assets of the fund. On the first business day of each month,
each series of shares pays a management fee to the manager for the previous
month at the rate specified. The fee for the previous month is calculated by
multiplying the applicable fee for such series by the aggregate average daily
closing value of the series' net assets during the previous month, and further
multiplying that product by a fraction, the numerator of which is the number of
days in the previous month and the denominator of which is 365 (366 in leap
years).
Prospectus Additional Information You Should Know 13
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend paying agent for the fund. It
provides facilities, equipment and personnel to the fund and is paid for such
services by the manager. Certain recordkeeping and administrative services that
would otherwise be performed by the transfer agent may be performed by the
insurance company that purchases the fund's shares, and the manager may pay the
insurance company for such services.
The manager and the transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., chairman of the fund's Board of Directors,
controls American Century Companies, Inc. by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services, Inc.,
a registered broker-dealer and an affiliate of the fund's investment manager.
The manager pays all expenses for promoting sales of, and distributing the
shares offered by this Prospectus.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Variable Portfolios, Inc., the issuer of the fund, 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 the fund is American Century Tower, 4500 Main Street,
P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by
mail to that address or by telephone to 816-531-5575.
American Century Variable Portfolios, Inc. issues five series of common stock
with a par value of $.01 per share. Each series is commonly referred to as a
fund. The assets belonging to each series of shares are held separately by the
custodian. Each share 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 for those
matters which must be voted on separately by the series of shares affected.
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 votes cast in an election of directors can elect all of the directors
if they choose to do so and, in such event, the holders of the remaining votes
will not be able to elect any person or persons to the Board of Directors.
An insurance company issuing a variable contract invested in shares issued by
the fund 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 the fund,
shareholders of each series of shares shall be entitled to receive, pro rata,
all of the assets less the liabilities of that series.
We reserve the right to change any of our policies, practices and procedures
described in this Prospectus, including the Statement of Additional Information,
without shareholder approval except in those instances where shareholder
approval is expressly required.
14 Additional Information You Should Know American Century Investments
NOTES
Notes 15
NOTES
16 Notes
NOTES
Notes 17
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
Fax: 816-340-4360
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7778 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 1, 1997
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
VP Advantage
[front cover]
PROSPECTUS
MAY 1, 1997
VP Advantage
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Variable Portfolios offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. One of the funds, VP Advantage, is described
in this Prospectus. Its investment objective is listed on page 2 of this
Prospectus. The other funds are described in separate prospectuses. You should
consult the prospectus of the separate account of the specific insurance product
that accompanies this Prospectus to see which series of Variable Portfolios are
available for such insurance product.
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.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference.
Additional information is included in the Statement of Additional
Information dated May 1, 1997, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference. To obtain a
copy without charge, call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0070
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY VP ADVANTAGE
The investment objective of VP 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 is no assurance that the Fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund ....................2
Financial Highlights ................................4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund .....................5
Shareholders of Variable Portfolios .................6
Other Investment Practices,
Their Characteristics and Risks ...................6
Fundamentals of Fixed Income Investing .........6
Repurchase Agreements ..........................7
Portfolio Lending ..............................7
Foreign Securities .............................7
Forward Currency Exchange Contracts ............8
Derivative Securities ..........................8
Short Sales ....................................9
When-Issued Securities .........................9
Rule 144A Securities ...........................10
Performance Advertising .............................10
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price .........................................12
Purchase and Redemption of Shares ..............12
When Share Price Is Determined .................12
How Share Price Is Determined ..................12
Distributions .......................................13
Taxes ...............................................13
Management ..........................................13
Investment Management ..........................13
Code of Ethics .................................14
Transfer and Administrative Services ...........14
Distribution of Fund Shares .........................14
Further Information About American Century ..........14
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
VP ADVANTAGE
The Financial Highlights for each of the periods presented have been
audited by Baird, Kurtz & Dobson, independent certified public accountants,
whose report thereon appears in the fund's annual report, which is incorporated
by reference into the Statement of Additional Information. The annual report
contains additional performance information and will be made available upon
request and without charge. The information presented is for a share outstanding
throughout the years ended December 31, except as noted.
1996 1995 1994 1993 1992 1991(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ................ $ 6.19 $ 5.48 $ 5.57 $ 5.32 $ 5.64 $ 5.00
Income From
Investment Operations
Net Investment Income ......... .20 .20 .15 .11 .11 .05
Net Realized and
Unrealized Gain (Loss)
on Investment
Transactions .................. .34 .71 (.09) .25 (.32) .64
Total From
Investment Operations ......... .54 .91 .06 .36 (.21) .69
Distributions
From Net
Investment Income ............. (.15) (.20) (.15) (.11) (.11) (.05)
From Net Realized
Gains on Investment
Transactions .................. (.29) -- -- -- -- --
Total Distributions ........... (.44) (.20) (.15) (.11) (.11) (.05)
Net Asset Value,
End of Period ...................... $ 6.29 $ 6.19 $ 5.48 $ 5.57 $ 5.32 $ 5.64
Total Return(2) .................... 9.25% 16.75% 1.03% 6.82% (3.75%) 33.14%(3)
RATIOS/SUPPLEMENTAL
DATA
Ratio of
Operating Expenses
to Average Net Assets ......... .98% .95% 1.00% 1.00% 1.00% 1.00%(3)
Ratio of Net
Investment Income
to Average Net Assets ......... 3.10% 3.32% 2.65% 2.07% 2.32% 3.14%(3)
Portfolio
Turnover Rate ................. 80% 99% 57% 77% 85% 5%
Average Commission
Paid per Investment
Security Traded ............... $ .0380 $ .0410 --(4) --(4) --(4) --(4)
Net Assets, End
of Period (in thousands) ...... $ 25,230 $ 24,037 $ 22,413 $ 20,959 $ 16,580 $ 3,069
(1) August 1, 1991 (inception) through December 31, 1991.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
(3) Annualized.
(4) Disclosure of average commission paid per investment security traded was
not required prior to the year ended December 31, 1995.
</TABLE>
4 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
American Century Variable 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 identified on page 2 of this Prospectus and any other investment
policies designated as "fundamental" in this Prospectus or in the Statement of
Additional Information, cannot be changed without shareholder approval. The fund
has implemented additional investment policies and practices to guide its
activities in the pursuit of its investment objective. These policies and
practices, which are described throughout this Prospectus, are not designated as
fundamental policies and may be changed without shareholder approval.
The investment objective of VP 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 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-backed and
other asset-backed securities, and repurchase agreements fully collateralized by
such securities.
The government securities in which the fund may invest include: (1) direct
obligations of the United States, such as Treasury bills, notes and bonds, which
are supported by the full faith and credit of the United States, and (2)
obligations, (including mortgage-backed securities) issued or guaranteed by
agencies and instrumentalities of the United States government that are
established under an act of Congress. The securities of some of these agencies
and instrumentalities, such as the Government National Mortgage Association, are
guaranteed as to principal and interest by the U.S. Treasury, and other
securities are supported by the right of the issuer, such as the Federal Home
Loan Banks, to borrow from the Treasury. Other obligations, including those
issued by the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, are supported only by the credit of the instrumentality.
Mortgage-backed securities in which the fund may invest include
collateralized mortgage obligations ("CMOs") issued by a United States agency or
instrumentality. A CMO is a debt security that is collateralized by a portfolio
or pool of mortgages or mortgage-backed securities. The issuer's obligation to
make interest and principal payments is secured by the underlying pool or
portfolio of mortgages or securities.
The market value of mortgage-backed securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of principal
and interest by the U.S. government, is not insured. When interest rates rise,
the market value of those securities may decrease in the same manner as other
debt, but when interest rates decline, their market value may not increase as
much as other debt instru-
Prospectus Information Regarding the Fund 5
ments because of the prepayment feature inherent in the underlying mortgages. If
such securities are purchased at a premium, the fund will suffer a loss if the
obligation is prepaid. Prepayments will be reinvested at prevailing rates, which
may be less than the rate paid by the prepaid obligation.
For the purpose of determining the weighted average portfolio maturity of
the fund, the manager shall consider the maturity of a security, issued by the
Government National Mortgage Association, or other mortgage-backed security to
be the remaining expected average life of the security. The average life of such
securities is likely to be substantially less than the original maturity as a
result of prepayments of principal on the underlying mortgages, especially in a
declining interest rate environment. In determining the remaining expected
average life, the manager makes assumptions regarding prepayments on underlying
mortgages. In a rising interest rate environment, those prepayments generally
decrease, and may decrease below the rate of prepayment assumed by the manager
when purchasing those securities. Such slowdown may cause the remaining maturity
of those securities to lengthen, which will increase the relative volatility of
those securities and, hence, the fund holding the securities. See "Fundamentals
of Fixed Income Investing," this page.
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 10-year
range. The manager will actively manage such portion of the fund's assets,
adjusting the weighted average portfolio maturity in response to expected
changes in interest rates. During periods of rising interest rates, a shorter
weighted average maturity may be adopted in order to reduce the effect of 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 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, the fund 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 VARIABLE PORTFOLIOS
Variable Portfolios will offer its shares only to insurance companies for
the purpose of funding variable annuity or variable life insurance contracts.
Although Variable 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 Variable Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, Variable 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 PRACTICES, THEIR CHARACTERISTICS
AND RISKS
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 bonds and other securities that
trade on a yield basis
6 Information Regarding the Fund American Century Investments
rise. On the other hand, when prevailing interest rates rise, bond prices fall.
Generally, the longer the maturity of a debt security, the higher its yield
and the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.
These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds, to change. If sustained
over time, it would also have the impact of raising or lowering the yield of
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 tend to 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 like 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 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 manager 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 fund shareholders.
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 ("DRs") for foreign
securities. DRs are securities listed on exchanges or quoted in the
over-the-counter markets in one country but represent shares of issuers
domiciled in another country.
Prospectus Information Regarding the Fund 7
DRs may be sponsored or unsponsored. Direct investments in foreign securities
may be made either on foreign securities exchanges or in the over-the-counter
markets.
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 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 U.S. dollar
may be an important factor in the overall performance of the fund.
To protect against adverse movements in exchange rates between currencies,
the fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into foreign currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where the fund would be obligated to deliver an
amount of foreign currency in excess of the aggregate value of its portfolio
securities or other assets denominated in, or whose value is tied to, that
currency.
The fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the fund will enter
into portfolio hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund,
when required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment. At any given time, no more than 10% of the
fund's assets will be committed to a segregated account in connection with
portfolio hedging transactions.
Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the fund against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the use of forward currency exchange contracts tends
to limit the potential gains that might result from a positive change in the
relationship between the foreign currency and the U.S. dollar.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund
may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the
8 Information Regarding the Fund American Century Investments
value of which is based on, or "derived" from, a traditional security, asset, or
market index. Certain derivative securities are more accurately described as
"index/structured securities." Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as DRs), currencies, interest rates, indexes or other financial indicators
("reference indexes"). 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 price of oil would not be a permissible investment because the
fund may not invest in oil and gas leases or futures.
The return on a derivative security may increase or decrease, depending
upon changes in the reference index or the instrument to which it relates.
There are a range of risks associated with derivative investments,
including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
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 the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.
SHORT SALES
The fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost. These transactions allow the fund to hedge against
price fluctuations by locking in a sale price for securities it does not wish to
sell immediately.
The fund may make a short sale when it wants to sell the security it owns
at a current attractive price, but also wishes to defer recognition of gain or
loss for federal income tax purposes and for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code and Regulations.
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
Prospectus Information Regarding the Fund 9
equal to the when-issued commitments will be established and maintained with the
custodian. No income will accrue to the fund prior to delivery.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the fund's
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. The staff also
acknowledges that, while the Board retains ultimate responsibility, it may
delegate this function to the manager. Accordingly, the Board has established
guidelines and procedures for determining the liquidity of Rule 144A securities
and has delegated the day-to-day function of determining the liquidity of 144A
securities to the manager. The Board retains the responsibility to monitor the
implementation of the guidelines and procedures it has adopted.
Since the secondary market for such securities 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, the fund's manager will consider appropriate remedies to
minimize the effect on the fund's liquidity.
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).
PERFORMANCE ADVERTISING
From time to time, the fund (or the insurance companies that use the fund
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, 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 compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects 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 SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes,
the fund's yield may not equal income paid on your shares or the income reported
in the fund's financial statements.
The fund 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
10 Information Regarding the Fund American Century Investments
Lehman Intermediate Government Bond Index, the constant maturity five-year U.S.
Treasury Note Index and the Bank Rate Monitor National Index of 2 1/2 -year CD
rates. Fund performance also may be compared to the rankings prepared by Lipper
Analytical Services, Inc. Fund performance also may be compared, on a relative
basis, to other funds in our fund family. This relative comparison, which may be
based upon historical or expected fund performance, volatility or other fund
characteristics, may be presented numerically, graphically or in text.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Performance figures advertised by the fund 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.
Prospectus Information Regarding the Fund 11
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 separate account.
Shares of the fund are sold and redeemed by the fund 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 VP Advantage shares is also referred to as their net asset
value. Net asset value is determined by calculating the total value of the
fund's assets, deducting total liabilities and dividing the result by the number
of shares outstanding. Net asset value is determined at the close of regular
trading on each day that the New York Stock Exchange is open. Investments and
requests to redeem shares received by the separate account before the close of
business of the Exchange, usually 3 p.m. Central time, are effective, and will
receive the price determined, that day as of the close of the Exchange.
Investment, redemption and exchange requests received thereafter are effective
on, and receive the price determined as of the close of the Exchange on, the
next day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized
as follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic stock exchange are valued at the latest sale price on that
exchange. Portfolio securities primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on the
exchange where primarily traded. If no sale is reported, or if local convention
or regulation so provides, the mean of the latest bid and asked prices is used.
Depending on local convention or regulation, securities traded over the counter
are priced at the mean of the latest bid and asked prices, or at the last sale
price. When market quotations are not readily available, securities and other
assets are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures adopted by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business 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 that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which the fund's net asset value is not calculated.
Therefore, such calculation does not take place con-
12 Additional Information You Should Know American Century Investments
temporaneously 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
In general, distributions from net investment income and net realized
securities gains, if any, are declared and paid once a year, but the fund may
make distributions on a more frequent basis to comply with the 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.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means to the extent its income is distributed to shareholders, it
pays no income tax. For a discussion of the tax status of your variable
contract, refer to the prospectus of your insurance company separate account.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the fund. Acting pursuant
to an investment management agreement entered into with the fund, American
Century Investment Management, Inc. serves as the investment manager of the
fund. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional investors since it
was founded in 1958.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the fund's portfolio as 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 VP Advantage team and their work
experience for the last five years are as follows:
Charles M. Duboc, Senior Vice President and Portfolio Manager, joined
American Century in August 1985 and served as fixed income Portfolio Manager
from that time until April 1993. In April 1993, Mr. Duboc joined American
Century equity investment efforts. He is a member of the team that manages the
equity portion of VP Advantage.
Norman E. Hoops, Senior Vice President and fixed income Portfolio Manager,
joined American Century as Vice President and Portfolio Manager in November
1989. In April 1993, he became Senior Vice President. He is a member of the team
that manages the fixed income portion of VP Advantage.
Nancy B. Prial, Vice President and Portfolio Manager, joined American
Century in February 1994 as a Portfolio Manager. She is a member of the team
that manages the equity portion of VP Advantage. For more than four years prior
to joining American Century, Ms. Prial served as Senior Vice President and
Portfolio Manager at Frontier Capital Management Company, Boston, Massachusetts.
The activities of the manager are subject only to directions of the fund's
Board of Directors. The manager pays all the expenses of the fund except
brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.
For the service provided to the fund, the manager receives an annual fee of
1% of the average net assets of the fund. On the first business day of each
month, each series of shares pays a management fee to the manager for the
previous month at the rate specified. The fee for the previous month is
calculated by multiplying the applicable fee for such series by the aggregate
average daily closing value of the series' net assets during the previous month,
and further multiplying that product by a fraction, the numerator of which is
the number of days in the previous month and the denominator of which is 365
(366 in leap years).
Prospectus Additional Information You Should Know 13
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, acts as transfer agent and dividend paying agent for the fund.
It provides facilities, equipment and personnel to the fund and is paid for such
services by the manager. Certain recordkeeping and administrative services that
would otherwise be performed by the manager agent may be performed by the
insurance company that purchases the fund's shares, and the transfer may pay the
insurance company for such services.
The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., chairman of the fund's Board of
Directors, controls American Century Companies, Inc. by virtue of his ownership
of a majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the fund's investment
manager. The manager pays all expenses for promoting sales of, and distributing
the shares offered by this Prospectus.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Variable Portfolios, Inc., the issuer of the fund, 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 the fund is American Century Tower, 4500 Main
Street, P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be
made by mail to that address or by telephone to 816-531-5575.
American Century Variable Portfolios, Inc. issues five series of common
stock with a par value of $.01 per share. Each series is commonly referred to as
a fund. The assets belonging to each series of shares are held separately by the
custodian. Each share 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 for those
matters which must be voted on separately by the series of shares affected.
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 votes cast in an election of directors can elect all of the
directors if they choose to do so, and, in such event, the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
An insurance company issuing a variable contract invested in shares issued
by the fund 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 the fund,
shareholders of each series of shares shall be entitled to receive, pro rata,
all of the assets less the liabilities of that series.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.
14 Additional Information You Should Know American Century Investments
NOTES
Notes 15
NOTES
16 Notes
NOTES
Notes 17
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
Fax: 816-340-4360
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9704 [recycled logo]
SH-BKT-7781 Recycled
<PAGE>
PROSPECTUS
[american century logo]
American
Century(sm)
MAY 1, 1997
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
VP International
[front cover]
PROSPECTUS
MAY 1, 1997
VP International
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century Variable Portfolios, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Variable Portfolios offers its
shares only to insurance companies to fund the benefits of variable annuity or
variable life insurance contracts. One of the funds, VP International, is
described in this Prospectus. The other funds are described in separate
prospectuses. You should consult the prospectus of the separate account of the
specific insurance product that accompanies this Prospectus to see which series
of Variable Portfolios are available for purchase for such insurance product.
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.
This Prospectus gives you information about the fund that you should know before
investing. Please read this Prospectus carefully and retain it for future
reference.
Additional information is included in the Statement of Additional Information
dated May 1, 1997, and filed with the Securities and Exchange Commission. It is
incorporated into this Prospectus by reference. To obtain a copy without charge
call or write:
AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419385
Kansas City, Missouri 64141-6385 o 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 o In Missouri: 816-753-0070
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY VP INTERNATIONAL
The investment objective of VP International is capital growth. The fund 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 6.
There is no assurance that the Fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 Investment Objective American Century Investments
TABLE OF CONTENTS
Investment Objective of the Fund...............................................2
Financial Highlights...........................................................4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund................................................5
Risk Factors...................................................................6
Shareholders of Variable Portfolios............................................7
Other Investment Practices, Their Characteristics
and Risks....................................................................7
Forward Currency Exchange Contracts.......................................7
Derivative Securities.....................................................8
Indirect Foreign Investment...............................................8
Sovereign Debt Obligations................................................8
Repurchase Agreements.....................................................9
When-Issued Securities....................................................9
Short Sales...............................................................9
Rule 144A Securities......................................................9
Performance Advertising.......................................................10
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
Investment Management....................................................12
Code of Ethics...........................................................12
Transfer and Administrative Services.....................................13
Distribution of Fund Shares...................................................13
Further Information About American Century....................................13
Prospectus Table of Contents 3
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
VP INTERNATIONAL
The Financial Highlights for each of the periods presented have been audited by
Baird, Kurtz & Dobson, independent certified public accountants, whose report
appears in the fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The annual report contains additional
performance information and will be made available upon request and without
charge. The information presented is for a share outstanding throughout the
years ended December 31, except as noted.
1996 1995 1994(1)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............................. $5.33 $4.75 $5.00
Income From Investment Operations
Net Investment Income(2) .................................... .02 .03 --
Net Realized and Unrealized
Gain (Loss) on Investment Transactions....................... .74 .55 (.25)
Total From Investment Operations............................. .76 .58 (.25)
Distributions
From Net Investment Income................................... (.03) -- --
In Excess of Net Investment Income........................... (.07) -- --
From Net Realized Gains on Investment Transactions........... (.03) -- --
Total Distributions.......................................... (.13) -- --
Net Asset Value, End of Period.................................... $5.96 $5.33 $4.75
Total Return(3).............................................. 14.41% 12.21% (5.00%)
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to Average Net Assets................ 1.50% 1.50% 1.50%(4)
Ratio of Net Investment Income (Loss) to Average Net Assets...... .31% .70% (.11%)(4)
Portfolio Turnover Rate.......................................... 154% 214% 157%
Average Commission Paid per Investment Security Traded........... $.0225 $.0020 --(5)
Net Assets, End of Period (in thousands)......................... $101,335 $51,609 $17,993
(1) May 1, 1994 (inception) through December 31, 1994.
(2) Computed using average shares outstanding throughout the period.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(4) Annualized.
(5) Disclosure of average commission paid per investment security traded was
not required prior to the year ended Decmeber 31, 1995.
</TABLE>
4 Financial Highlights American Century Investments
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
American Century Variable 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
identified on page 2 of this Prospectus, and any other investment policies
designated as "fundamental" in this Prospectus or in the Statement of Additional
Information, cannot be changed without shareholder approval. The fund has
implemented additional investment policies and practices to guide its activities
in the pursuit of its investment objective. These policies and practices, which
are described throughout this Prospectus, are not designated as fundamental
policies and may be changed without shareholder approval.
The investment objective of VP 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. The fund 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, and 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. or BBB or better by Standard & Poor's corporation, 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 ("DRs") for foreign securities. DRs are securities listed on
exchanges or quoted in the over-the-counter markets in one country but represent
shares of issuers domiciled in another country. DRs may be sponsored or
unsponsored. Direct investment in foreign securities may be made either on
foreign securities exchanges or on the over-the-counter markets.
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 the United States, derives at least 50% of its total revenue from
production or sales outside the United States, and/or whose shares trade
principally on an exchange or other market outside the United States.
Prospectus Information Regarding the Fund 5
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. As with any investment in
securities, the value of an investment in the fund can decrease as well as
increase, depending upon a variety of factors which may affect the values and
income generated by the fund's portfolio securities. 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 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
6 Information Regarding the Fund American Century Investments
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 VARIABLE PORTFOLIOS
Variable Portfolios will offer its shares only to insurance companies for the
purpose of funding variable annuity or variable life insurance contracts.
Although Variable 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 Variable Portfolios might at some
time be in conflict due to future differences in tax treatment of variable
products or other considerations. Consequently, Variable 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 PRACTICES, THEIR CHARACTERISTICS AND RISKS
For additional information, 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 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 U.S. dollar
may be an important factor in the overall performance of the fund.
To protect against adverse movements in exchange rates between currencies, the
fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.
The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.
By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its trades.
When the manager believes that a particular currency may decline in value
compared to the U.S. dollar, the fund may enter into foreign currency exchange
contracts to sell the value of some or all of the fund's portfolio securities
either denominated in, or whose value is tied to, that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where the fund would be obligated to deliver an
amount of foreign currency in excess of the aggregate value of its portfolio
securities or other assets denominated in, or whose value is tied to, that
currency.
The fund will make use of portfolio hedging to the extent deemed appropriate by
the manager. However, it is anticipated that the fund will enter into portfolio
hedges much less frequently than transaction hedges.
If the fund enters into a forward currency exchange contract, the fund, when
required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an
Prospectus Information Regarding the Fund 7
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 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.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the fund may
invest in securities that are commonly referred to as "derivative" securities.
Generally, a derivative is a financial arrangement the value of which is based
on, or "derived" from, a traditional security, asset, or market index. Certain
derivative securities are more accurately described as "index/structured
securities." Index/structured securities are derivative securities whose value
or performance is linked to other equity securities (such as DRs), currencies,
interest rates, indexes or other financial indicators ("reference indexes"). 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 price of oil
would not be a permissible investment because the fund may not invest in oil and
gas leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or the instrument to which it relates.
There are a range of risks associated with derivative investments, including:
o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;
o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;
o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and
o the risk that the counterparty will fail to perform its obligations.
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 the manager's policy regarding investments
in derivative securities. That policy specifies factors that must be considered
in connection with a purchase of derivative securities. The policy also
establishes a committee that must review certain proposed purchases before the
purchases can be made. The manager will report on fund activity in derivative
securities to the Board of Directors as necessary. In addition, the Board will
review the manager's policy for investments in derivative securities annually.
INDIRECT FOREIGN INVESTMENT
Subject to certain restrictions contained in the Investment Company Act, the
fund may invest in certain foreign countries indirectly through investment funds
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
8 Information Regarding the Fund American Century Investments
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 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 manager 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 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.
A fund may make a short sale when it wants to sell the security it owns at a
current attractive price, but also wishes to defer recognition of gain or loss
for federal income tax purposes and for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code and
Regulations.
RULE 144A SECURITIES
The fund may, from time to time, purchase Rule 144A securities when they present
attractive investment opportunities that otherwise meet the fund's criteria for
selection. Rule 144A securities are securities that are privately placed with
and traded among qualified institutional investors rather than the general
public. Although Rule 144A securities are considered "restricted securities,"
they are not necessarily illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission has taken the position that the liquidity of
such securities in the portfolio of a fund offering redeemable securities is a
question of fact for the Board of Directors to determine, such determination to
be based upon a consideration of the readily available trading markets and the
review of any contractual restrictions. The staff also acknowledges that, while
the Board retains ultimate responsibility, it may delegate this function to the
manager. Accordingly, the
Prospectus Information Regarding the Fund 9
Board has established guidelines and procedures for determining the liquidity of
Rule 144A securities and has delegated the day-to-day function of determining
the liquidity of 144A securities to the manager. The Board retains the
responsibility to monitor the implementation of the guidelines and procedures it
has adopted.
Since the secondary market for such securities 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, the fund's manager will consider appropriate remedies to
minimize the effect on the fund's liquidity. 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).
PERFORMANCE ADVERTISING
From time to time the fund (or the insurance companies that use the fund 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 compound return over a stated period of time that would have produced
the fund's cumulative total return over the same period if the fund's
performance had remained constant throughout.
The fund may also include in advertisements data comparing performance with the
performance of non-related investment media, published editorial comments and
performance rankings compiled by independent organizations (such as Lipper
Analytical Services or Donoghue's Money Fund Report) and publications that
monitor the performance of mutual funds. Performance information may be quoted
numerically or may be 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, the
Dow Jones World Index and the Morgan Stanley Capital International Europe,
Australia, Far East (EAFE) Index. Fund performance also may be compared to the
rankings prepared by Lipper Analytical Services, Inc. Fund performance also may
be compared, on a relative basis, to other funds in our fund family. This
relative comparison, which may be based upon historical or expected fund
performance, volatility or other fund characteristics, may be presented
numerically, graphically or in text.
All performance information advertised by the fund is historical in nature and
is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
Performance figures advertised by the fund 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 Information Regarding the Fund American Century Investments
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 separate account.
Shares of the fund are sold and redeemed by the fund 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 VP International shares is also referred to as their net asset
value. Net asset value is determined by calculating the total value of the
fund's assets, deducting total liabilities and dividing the result by the number
of shares outstanding. Net asset value is determined at the close of regular
trading on each day that the New York Stock Exchange is open. Investments and
requests to redeem shares received by the separate account before the close of
business of the Exchange, usually 3 p.m. Central time, are effective on, and
will receive the price determined, that day as of the close of the Exchange.
Investment, redemption and exchange requests received thereafter are effective
on, and receive the price determined as of the close of the Exchange on the next
day the Exchange is open.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic stock exchange are valued at the latest sale price on that
exchange. 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 prices is used.
Depending on local convention or regulation, securities traded over the counter
are priced at the mean of the latest bid and asked prices, or at the last sale
price. When market quotations are not readily available, securities and other
assets are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then converted to 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 would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every New
York Stock Exchange business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the New York Stock Exchange
is not open and on which a fund's net asset value is not calculated. Therefore,
such calculation does not take place contemporaneously with the determination of
the prices of many of the portfolio securities used in such calcu-
Prospectus Additional Information You Should Know 11
lation 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
In general, distributions from net investment income and net realized securities
gains, if any, are declared and paid once a year, but the fund may make
distributions on a more frequent basis to comply with the 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.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means to the extent its income is distributed to shareholders, it
pays no income tax. For a discussion of the tax status of your variable
contract, refer to the prospectus of your insurance company's separate account.
MANAGEMENT
INVESTMENT MANAGEMENT
Under the laws of the State of Maryland, the Board of Directors is responsible
for managing the business and affairs of the fund. Acting pursuant to an
investment management agreement entered into with the fund, American Century
Investment Management, Inc. serves as the investment manager of the fund. Its
principal place of business is American Century Tower, 4500 Main Street, Kansas
City, Missouri 64111. The manager has been providing investment advisory
services to investment companies and institutional investors since it was
founded in 1958.
The manager supervises and manages the investment portfolio of the fund and
directs the purchase and sale of its investment securities. It utilizes a team
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the fund. The team meets regularly to review portfolio
holdings and to discuss purchase and sale activity. The team adjusts holdings in
the fund's portfolio as 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 VP International team and their principal
work experience during the past five years are as follows:
Henrik Strabo, Vice President and Portfolio Manager, joined American Century in
1993 as an Investment Analyst and has been a portfolio manager member of the VP
International team since its inception in 1994. Prior to joining American
Century, Mr. Strabo was Vice President, International Equity Sales with Barclays
de Zoete Wedd (1991 to 1993) and obtained international equity sales experience
at Cresvale International from 1990 to 1991.
Mark S. Kopinski, Vice President and Portfolio Manager, rejoined American
Century in April 1997. From June 1995 to March 1997, Mr. Kopinski served as Vice
President and Portfolio Manager for Federated Investors, Inc. Prior to June
1995, Mr. Kopinski was a Vice President and Portfolio Manager for American
Century. He is a member of the team that manages VP International.
The activities of the manager are subject only to directions of the fund's Board
of Directors. The manager pays all the expenses of the funds except brokerage,
taxes, interest, fees and expenses of the non-interested person directors
(including counsel fees) and extraordinary expenses.
For the services provided to the fund, the manager is paid a fee of 1.5% of the
average net assets of the fund. On the first business day of each month, each
series of shares pays a management fee to the manager for the previous month at
the rate specified. The fee for the previous month is calculated by multiplying
the applicable fee for such series by the aggregate average daily closing value
of the series' net assets during the previous month, and further multiplying
that product by a fraction, the numerator of which is the number of days in the
previous month and the denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts personal
investing practices by employees of the manager and its affiliates. Among other
provisions, the Code of Ethics requires that employees with access to
information about the pur-
12 Additional Information You Should Know American Century Investments
chase or sale of securities in the fund's portfolios obtain preclearance before
executing personal trades. With respect to Portfolio Managers and other
investment personnel, the Code of Ethics prohibits acquisition of securities in
an initial public offering, as well as profits derived from the purchase and
sale of the same security within 60 calendar days. These provisions are designed
to ensure that the interests of fund shareholders come before the interests of
the people who manage those funds.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend paying agent for the fund. It
provides facilities, equipment and personnel to the fund, and is paid for such
services by the manager. Certain recordkeeping and administrative services that
would otherwise be performed by the transfer agent may be performed by the
insurance company that purchases the fund's shares, and the manager may pay the
insurance company for such services.
The manager and the transfer agent are both wholly owned by American Century
Companies, Inc. James E. Stowers Jr., chairman of the fund's Board of Directors,
controls American Century Companies, Inc. by virtue of his ownership of a
majority of its common stock.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by American Century Investment Services, a
registered broker-dealer and an affiliate of the fund's investment manager. The
manager pays all expenses for promoting sales of, and distributing the shares
offered by this Prospectus.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Variable Portfolios, Inc., the issuer of the fund, 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 the fund is American Century Tower, 4500 Main Street,
P.O. Box 419385, Kansas City, Missouri 64141-6385. All inquiries may be made by
mail to that address, or by telephone to 816-531-5575.
American Century Variable Portfolios, Inc. issues five series of common stock
with a par value of $.01 per share. Each series is commonly referred to as a
fund. The assets belonging to each series of shares are held separately by the
custodian. Each share 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 for those
matters which must be voted on separately by the series of shares affected.
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 votes cast in an election of directors can elect all of the directors
if they choose to do so, and, in such event, the holders of the remaining votes
will not be able to elect any person or persons to the Board of Directors.
An insurance company issuing a variable contract invested in shares issued by
the fund 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 the fund shareholders
of each series of shares shall be entitled to receive, pro rata, all of the
assets less the liabilities of that series.
We reserve the right to change any of our policies, practices and procedures
described in this Prospectus, including the Statement of Additional Information,
without shareholder approval except in those instances where shareholder
approval is expressly required.
Prospectus Additional Information You Should Know 13
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-753-0070
Fax: 816-340-4360
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9703 [recycled logo]
SH-BKT-7777 Recycled
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century Logo]
American
Century(sm)
MAY 1, 1997
AMERICAN CENTURY
VARIABLE
PORTFOLIOS, INC.
VP Capital Appreciation
VP Value
VP Balanced
VP Advantage
VP International
[front cover]
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
This statement is not a prospectus but should be read in conjunction with
the current Prospectus of American Century Variable Portfolios, Inc. and its
five series of shares, VP Capital Appreciation, VP Value, VP Balanced, VP
Advantage or VP International as the case may be. Each of such prospectuses is
dated May 1, 1997. Please retain this document for future reference. To obtain
copies of the various American Century Variable Portfolios prospectuses, call
American Century at 1-800-345-3533 or 816-531-5575, or write to P.O. Box 419385,
Kansas City, Missouri 64141-6385.
TABLE OF CONTENTS
Selection of Investments ................................2
Additional Investment Restrictions ......................2
Futures Contracts .......................................4
An Explanation of Fixed Income Securities Ratings .......5
Short Sales .............................................7
Portfolio Turnover ......................................7
Performance Advertising .................................8
Officers and Directors ..................................9
Management ..............................................10
Custodian ...............................................11
Independent Auditors ....................................11
Capital Stock ...........................................11
Brokerage ...............................................12
Redemptions in Kind .....................................13
Holidays ................................................13
Financial Statements ....................................13
Statement of Additional Information 1
SELECTION OF INVESTMENTS
Currently, American Century Variable Portfolios offers five funds: VP
Capital Appreciation, VP Value, VP Balanced, VP Advantage and VP International.
Such funds are sometimes individually referred to as a "fund," and collectively
as the "funds."
VP CAPITAL APPRECIATION
In achieving their investment objectives, the funds of American Century
Variable 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, VP Capital Appreciation,
VP Value, VP International and, with regard to the equity portion of their
portfolios, VP Balanced and VP 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 VP Capital Appreciation, VP Value, VP International
and the equity portion of VP Balanced and VP Advantage will generally consist of
common stocks. However, the 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.
VP VALUE
Management intends to invest the assets of VP Value primarily in equity
securities of well-established companies with intermediate-to-large market
capitalizations that management believes to be undervalued at the time of
purchase. The selection of these investments is described above under "Selection
of Investments--VP Capital Appreciation."
VP BALANCED
Management intends to invest the VP Balanced portfolio approximately 60% in
common stocks and the remainder in fixed income securities. Equity security
investments are described above under "Selection of Investments--VP Capital
Appreciation." 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 U.S. 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.
VP ADVANTAGE
Management intends to invest approximately (i) 20% of VP 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--VP Capital Appreciation."
VP INTERNATIONAL
Management intends to invest the assets of VP International primarily in an
internationally diversified portfolio of common stocks. The selection of these
investments is described above under "Selection of Investments--VP Capital
Appreciation."
ADDITIONAL INVESTMENT RESTRICTIONS
Additional fundamental policies applicable to American Century Variable
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 American Century 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) Except with regard to VP Value to which this restriction shall apply with
regard to 75% of its portfolio, 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 U.S. 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
(however, VP Value may make margin deposits in connection with the use of
any financial instrument or any transaction in securities permitted by its
fundamental policies), or, except with regard to VP Value, 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 that the corporation owns of the other investment company exceed
5% of the total assets of the corporation, or (c) the securities that 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) Except with regard to VP Value, 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,
broker-dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership.
To comply with the requirements of state securities administrators,
American Century Variable Portfolios may, from time to time, agree to additional
investment restrictions. These restrictions are not fundamental policies and may
be adopted, revised or withdrawn,
Statement of Additional Information 3
without shareholder approval, as required or permitted by the various state
securities administrators.
The Investment Company Act also provides that the funds may not invest more
than 25% of their assets in the securities of issuers engaged in a single
industry. In determining industry groups for purposes of this standard, the
Securities and Exchange Commission ordinarily uses the Standard Industry
Classification codes developed by the United States Office of Management and
Budget. In the interest of ensuring adequate diversification, the funds monitor
industry concentration using a more restrictive list of industry groups than
that recommended by the SEC. The funds believe that these classifications are
reasonable and are not so broad that the primary economic characteristics of the
companies in a single class are materially different. The use of these more
restrictive industry classifications may, however, cause the funds to forego
investment possibilities which may otherwise be available to them under the
Investment Company Act.
Neither the SEC nor any other agency of the federal or state government
participates in or supervises the funds' management or their investment
practices or policies.
FUTURES CONTRACTS
As described in the Prospectus, VP Value may enter into 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 futures contract is adjusted daily to reflect the
fluctuation of the value of the underlying securities. 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 is generally entitled
to receive all or a portion of this amount.
The fund maintains from time to time a percentage of its 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 securities to which the futures contract relates may go
down in value (market risk); and
o adverse price movements in the underlying securities 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. The fund
may seek to manage liquidity
4 American Century Investments
risk by investing only in exchange-traded futures. Exchange-traded futures pose
less risk that there will not be a liquid 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.
The fund 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 VP 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 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
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 conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
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
Statement of Additional Information 5
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 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.
6 American Century Investments
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
A fund may engage in short sales if, at the time of the short sale, the
fund owns or has the right to acquire an equal amount of the security being sold
short at no additional cost.
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. To make delivery to the purchaser, the executing broker borrows the
securities being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account will be
maintained by the fund's custodian. 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.
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 in substantially identical securities may not become deductible for tax
purposes until all or some part of the short position has been closed.
PORTFOLIO TURNOVER
FUNDS INVESTING IN EQUITY SECURITIES
With respect to each series of shares, the manager will purchase and sell
securities without regard to the length of time the security has been held.
Accordingly, the rate of portfolio turnover may be greater than other investment
companies with similar investment objectives.
The funds intend to purchase a given security whenever the manager believes
it will contribute to the stated objective of the fund, even if the same
security has only recently been sold. In selling a given security, the manager
keeps in mind that (1) profits from sales of securities held less than three
months must be limited in order to meet the requirements of Subchapter M of the
Internal Revenue Code, and (2) profits from sales of securities are taxed to
shareholders. Subject to those considerations, a fund will sell a given
security, no matter for how long or how short a period it has been held in the
portfolio and no matter whether the sale is at a gain or at a loss, if the
manager believes that the security is not fulfilling its purpose, either
because, among other things, it did not live up to the manager's expectations,
or because it may be replaced with another security holding greater promise, or
because it has reached its optimum potential, or because of a change in the
circumstances of a particular company or industry or in general economic
conditions, or because of some combination of such reasons.
When a general decline in securities prices is anticipated, a fund may
decrease its 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 a fund's objectives, the manager believes that the rate
of portfolio turnover is irrelevant when it believes a change is in order to
achieve those objectives, and a fund's annual portfolio turnover rate cannot be
anticipated and may be comparatively high. This disclosure regarding portfolio
turnover is a statement of funda-
Statement of Additional Information 7
mental 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 fund 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 that 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, 1996 Dec. 31, 1996 Dec. 31, 1996
- -----------------------------------------------------------------------
VP
Capital
Appreciation (4.32)% 6.17% 10.81%
(11/20/87)(1)
VP
Balanced 12.21% 6.71% 10.23%
(5/1/91)(1)
- -----------------------------------------------------------------------
From
Inception
Year ended Five years ended through
Fund Dec. 31, 1996 Dec. 31, 1996 Dec. 31, 1996
- -----------------------------------------------------------------------
VP
Advantage 9.25% 5.79 7.88%
(8/1/91)(1)
VP
International 14.41% -- 7.73%
(5/1/94)(1)
- ----------------------------------------------------------------------
(1) Date of inception of Fund.
From May 1, 1996 (inception)
Fund through December 31, 1996
- ----------------------------------------------------------------------
VP Value 12.28%
- ----------------------------------------------------------------------
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.
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, 1996 through Dec. 31, 1996
- ----------------------------------------------------------------------
VP Capital
Appreciation 154.91% 10.81%
VP Balanced 73.69% 10.23%
VP Advantage 50.80% 7.88%
VP International 21.96% 7.73%
VP Value 12.28% 18.92%
- ----------------------------------------------------------------------
PERFORMANCE FIGURES ADVERTISED BY AMERICAN CENTURY VARIABLE 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.
8 American Century Investments
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 the funds' investment manager, American Century Investment Management, Inc.
and its transfer agent, American Century Services Corporation are listed below.
The address at which each director and officer listed below may be contacted is
American Century Tower, 4500 Main Street, Kansas City, Missouri 64111. All
persons named as officers of the Corporation also serve in similar capacities
for other funds advised by the manager. Those directors who are "interested
persons" as defined in the Investment Company Act of 1940 are indicated by an
asterisk (*).
James E. Stowers Jr.,* Chairman of the Board and Director; Chairman of the
Board, Director and controlling shareholder of American Century Companies, Inc.,
parent corporation of American Century Investment Management, Inc. and American
Century Services Corporation; Chairman of the Board and Director of American
Century Investment Management, Inc. and American Century Services Corporation;
father of James E. Stowers III.
James E. Stowers III,* President, Chief Executive Officer and Director;
President, Chief Executive Officer and Director, American Century Companies,
Inc., American Century Investment Management, Inc. and American Century Services
Corporation.
Thomas A. Brown, Director; Chief Executive Officer, Associated Bearings
Company, a corporation engaged in the sale of bearings and power transmission
products.
Robert W. Doering, M.D., Director; general surgeon.
D. D. (Del) Hock, Director; Chairman, President and Chief Executive
Officer, Public Service Company of Colorado.
Linsley L. Lundgaard, Vice Chairman of the Board and Director; retired;
formerly Vice President and National Sales Manager, Flour Milling Division,
Cargill, Inc.
Donald H. Pratt, Director; President, Butler Manufacturing Company.
Lloyd T. Silver Jr., Director; President, LSC, Inc., manufacturer's
representative.
M. Jeannine Strandjord, Director; Senior Vice President and Treasurer,
Sprint Corporation.
William M. Lyons, Executive Vice President, Chief Operating Officer and
General Counsel; Executive Vice President. Executive Vice President, Chief
Operating Officer and General Counsel, American Century Companies, Inc.,
American Century Investment Management, Inc. and American Century Services
Corporation.
Robert T. Jackson, Executive Vice President- Finance and Principal
Financial Officer; Treasurer, American Century Companies, Inc. and American
Century Investment Management, Inc.; Executive Vice President and Treasurer,
American Century Services Corporation; formerly Executive Vice President, Kemper
Corporation.
Maryanne Roepke, Vice President and Treasurer; Vice President, American
Century Services Corporation.
Patrick A. Looby, Vice President and Secretary; Vice President, American
Century Services Corporation.
Merele A. May, Controller.
Robert J. Leach, Controller; formerly accountant, Ernst & Young LLP, Kansas
City, Missouri.
The Board of Directors has established four standing committees: the
Executive Committee, the Audit Committee, the Compliance Committee and the
Nominating Committee.
Messrs. Stowers Jr., Stowers III and Lundgaard constitute the Executive
Committee of the Board of Directors. The committee performs the functions of the
Board of Directors between meetings of the Board, subject to the limitations on
its power set out in the Maryland General Corporation Law and except for matters
required by the Investment Company Act to be acted upon by the whole Board.
Messrs. Lundgaard (chairman), Doering and Hock and Ms. Strandjord
constitute the Audit Committee. The functions of the Audit Committee include
recommending the engagement of the corporation's independent auditors, reviewing
the arrangements for and scope of the annual audit, reviewing comments made by
the independent auditors with respect to internal controls and the
considerations given or the corrective action taken by management and reviewing
nonaudit services provided by the independent auditors.
Statement of Additional Information 9
Messrs. Brown (chairman), Pratt and Silver constitute the Compliance
Committee. The functions of the Compliance Committee include reviewing the
results of the funds' compliance testing program, reviewing quarterly reports
from the manager to the Board regarding various compliance matters and
monitoring the implementation of the funds' Code of Ethics, including any
violations thereof.
The Nominating Committee has as its principal role, the consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the Board, management and shareholders. This
committee also reviews and makes recommendations to the Board with respect to
the composition of Board committees and other Board-related matters, including
its organization, size, composition, responsibilities, functions and
compensation. The members of the nominating committee are Messrs. Pratt
(chairman), Lundgaard and Stowers III.
The Directors of the corporation also serve as Directors for other funds
advised by the manager. Each Director who is not an "interested person" as
defined in the Investment Company Act receives for service as a member of the
Board of all six of such companies an annual director's fee of $44,000, a fee of
$1,000 per regular Board meeting attended and $500 per special Board meeting and
committee meeting attended. In addition, those directors who are not "interested
persons" 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 six investment companies based upon their relative net assets. Under
the terms of the management agreement with the manager, the funds are
responsible for paying such fees and expenses. Set forth below is the aggregate
compensation paid for the periods indicated by the funds and by the American
Century family of funds as a whole to each director of the corporation who is
not an "interested person" as defined in the Investment Company Act.
Aggregate Total Compensation from
Compensation the American Century
Director from the corporation1 Family of Funds2
- -----------------------------------------------------------------------
Thomas A. Brown $1,972 $46,333
Robert W. Doering, M.D. 1,823 42,833
Linsley L. Lundgaard 1,972 46,333
Donald H. Pratt 1,901 44,667
Lloyd T. Silver Jr. 1,887 44,333
M. Jeannine Strandjord 1,866 43,833
John M. Urie3 1,582 37,167
D. D. (Del) Hock 376 8,833
- ------------------------------------------------------------------------
1 Includes compensation paid by the corporation for the fiscal year ended
December 31, 1996.
2 Includes compensation paid by the 15 investment company members of the
American Century family of funds for the calendar year ended December 31,
1996.
3 Mr. Hock replaced Mr. Urie as a director effective October 31, 1996.
MANAGEMENT
A description of the responsibilities and method of compensation of the
funds' manager, American Century Investment Management, Inc. appears in the
Prospectus under the caption "Management."
During the past three fiscal years, the management fees were as follows:
Year Ended December 31,
Fund 1996 1995 1994
- --------------------------------------------------------------
VP Capital
Appreciation
Management
Fees $14,401,981 $12,365,098 $8,825,656
Average
Net Assets $1,444,414,188 $1,245,866,500 $882,565,600
VP Balanced
Management
Fees $1,832,133 $1,222,757 $910,453
Average
Net Assets $185,726,034 $126,219,800 $91,045,300
VP Advantage
Management
Fees $238,392 $218,240 $224,257
Average
Net Assets $24,477,270 $38,676,300 $22,425,700
- --------------------------------------------------------------
10 American Century Investments
Year Ended December 31,
Fund 1996 1995 1994
- -----------------------------------------------------------
VP International
Management
Fees $1,170,843 $596,598 $101,344
Average
Net Assets $78,092,615 $39,770,213 $10,065,459
VP Value
Fees $62,187 - -
Average
Net Assets $9,241,069 - -
- -----------------------------------------------------------
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (i) the funds'
Board of Directors, or by the vote of a majority of the outstanding votes (as
defined in the Investment Company Act), and (ii) by the vote of a majority of
the Directors of the funds who are not parties to the agreement or interested
persons of the manager, cast in person at a meeting called for the purpose of
voting on such approval.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the funds' Board of Directors, or by a vote of
a majority of the funds' shareholders, on 60 days' written notice to the
manager, and it shall be automatically terminated if it is assigned.
The management agreement provides that the manager shall not be liable to
the funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties.
The management agreement also provides that the manager and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
American Century Services Corporation provides physical facilities,
including computer hardware and software and personnel, for the day-to-day
administration of the funds and of the manager. The manager pays American
Century Services Corporation, for such services.
CUSTODIAN
Chase Manhattan Bank, N.A., 770 Broadway, New York, New York 10036 and UMB
Bank, N.A., 10th and Grand, Kansas City, Missouri 64105, each serves as
custodian of the assets of the funds. The custodians take no part in determining
the investment policies of the funds or in deciding which securities are
purchased or sold by the funds. The funds, however, may invest in certain
obligations of the custodians and may purchase or sell certain securities from
or to the custodians.
INDEPENDENT AUDITORS
At a meeting held on December 12, 1996, the Board of Directors of the
corporation appointed Deloitte & Touche LLP, 1010 Grand Avenue, Kansas City,
Missouri 64106, as the independent auditors of the funds to examine the
financial statements of the funds for the fiscal year ending December 31, 1997.
The appointment of Deloitte & Touche was recommended by the Audit Committee of
the Board of Directors. As the independent auditors of the funds, Deloitte &
Touche will provide services including (1) audit of the annual financial
statements, (2) assistance and consultation in connection with SEC filings and
(3) review of the annual federal income tax return filed for each fund by
American Century.
Baird, Kurtz & Dobson, City Center Square, 1100 Main Street, Kansas City,
Missouri 64105, served as independent auditors for the funds for the period
ended December 31, 1996.
CAPITAL STOCK
The funds' capital stock is described in the Prospectus under the heading
"Further Information About Variable Portfolios, Inc."
The corporation currently has five series of shares outstanding. The funds
may in the future 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 profits (or losses) of investments and other assets held for each series.
Your rights as a shareholder are the same for all other series of securities
unless otherwise stated. Within their respective series, all shares have equal
redemption rights. Each share, when issued, is fully
Statement of Additional Information 11
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 the funds,
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 April 7, 1997, in excess of 5% of the outstanding shares of VP
Capital Appreciation were owned of record as follows: Aetna Life Insurance and
Annuity Company, Hartford, Connecticut, owned 38.0%; Nationwide Life Insurance
Company, Columbus, Ohio, owned 40.4%; Mutual of America, New York, New York,
owned 6.7%; and Great-West Life and Annuity Company, Englewood, Colorado, owned
5.2%.
As of April 7, 1997, 98.2% of the outstanding shares of VP Advantage were
owned of record by Nationwide Life Insurance Company, Columbus, Ohio.
As of April 7, 1997, in excess of 5% of the outstanding shares of VP
Balanced were owned of record as follows: Nationwide Life Insurance Company,
Columbus, Ohio, owned 63.8%; Great-West Life and Annuity Insurance Company,
Englewood, Colorado, owned 22.0%; and Lincoln National Life Insurance Company,
Ft. Wayne, Indiana, owned 9.1%.
As of April 7, 1997, 92.2% of the outstanding shares of VP International
were owned of record by Nationwide Life Insurance Company, Columbus, Ohio.
As of April 7, 1997, in excess of 5% of the outstanding shares of VP Value
were owned of record as follows: IDS Life Insurance Company, Minneapolis,
Minnesota, owned 64.2%; Nationwide Life Insurance Company, Columbus, Ohio, owned
35.7%.
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 the funds and the
manager, the manager has the responsibility of selecting brokers to execute
portfolio transactions. The funds' policy is to secure the most favorable prices
and execution of orders on its portfolio transactions. So long as that policy is
met, the manager may take into consideration the factors 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 the manager believes that the facilities, expert personnel and
technological systems of a broker enable American Century Variable Portfolios to
secure as good a net price as it would have received from a market maker.
American Century Variable 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.
The manager receives statistical and other information and services
(brokerage and research services) without cost from broker-dealers. The manager
evaluates such information and services, together with all other information
that it may have, in supervising and managing the investment portfolios of the
funds. Because such information and services may vary in amount, quality and
reliability, their influence in selecting brokers varies from none to very
substantial. The manager proposes to continue to place some of the brokerage
business with one or more brokers who provide information and services.
The brokerage and research services received by the manager may be used
with respect to one or more of the funds and/or the other funds and accounts
over which it has investment discretion, and not all of such services may be
used by the manager in managing the portfolios of the funds. Such information
and services are in addition to and not in lieu of the services required to be
performed for the funds by the manager. The manager does not utilize brokers
that provide such information and services for the purpose of reducing the
expense of providing required services to the funds.
12 American Century Investments
Evaluation of the overall reasonableness of brokerage commissions is made
by the manager and reviewed by the Board of Directors of American Century
Variable Portfolios. In the years ended December 31, 1996, 1995 and 1994, the
funds paid brokerage commissions of $4,790,483, $4,525,472 and $2,875,685,
respectively.
The brokerage commissions paid by the funds may exceed those which another
broker might have charged for effecting the same transactions, because of the
value of the brokerage and research services provided by the broker. Factors
considered in such determinations are skill in execution of orders and the
quality of brokerage and research services received. Research services furnished
by brokers through whom the funds effect securities transactions may be used by
the manager in servicing all of its accounts, and not all such services may be
used by the manager in managing the portfolios of the funds.
The staff of the SEC has expressed the view that the best price and
execution of over-the-counter transactions in portfolio securities may be
secured by dealing directly with principal market makers, thereby avoiding the
payment of compensation to another broker. In certain situations, the officers
of the funds and the manager believe that the facilities, expert personnel and
technological systems of a broker enable the funds to secure as good a net price
by dealing with a broker instead of a principal market maker, even after payment
of the compensation to the broker. The funds normally place their
over-the-counter transactions with principal market makers but also may deal on
a brokerage basis when utilizing electronic trading networks or as circumstances
warrant.
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 corporation has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940, pursuant to which the funds are obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of a fund 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 securities delivered will be selected at the
sole discretion of the manager, and will not necessarily be representative of
the entire portfolio, and will be securities that the manager regards as least
desirable. The method of valuing portfolio securities used to make redemptions
in kind will be the same as the method of valuing portfolio securities described
in the Prospectus under the caption "How Share Price is Determined," and such
valuation will be made as of the same time the redemption price is determined.
HOLIDAYS
The funds do not determine the net asset value of their shares on days when
the New York Stock Exchange is closed. Currently, the Exchange is closed on
Saturdays and Sundays, and on holidays, namely New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
FINANCIAL STATEMENTS
The financial statements of the funds for the fiscal year ended December
31, 1996 are included in the annual report to shareholders for that period which
is incorporated herein by reference. You may receive copies of the annual report
without charge upon request to the funds at the address and telephone number
shown on page 1 of this Statement of Additional Information.
Statement of Additional Information 13
P.O. Box 419385
Kansas City, Missouri
64141-6385
Person-to-person assistance:
1-800-345-3533 or 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 or 816-444-3485
Fax: 816-340-4360
Internet: www.americancentury.com
[american century logo]
American
Century(sm)
9704 [recycled logo]
SH-BKT-8261 Recycled
<PAGE>
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
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 VP Capital
Appreciation (formerly known as TCI Growth).
2. Financial Highlights respecting shares of VP Balanced
(formerly known as TCI Balanced).
3. Financial Highlights respecting shares of VP Advantage
(formerly known as TCI Advantage).
4. Financial Highlights respecting shares of VP International
(formerly known as TCI International).
5. Financial Highlights respecting shares of VP Value (formerly
known as TCI Value).
(ii) Financial Statements filed in Part B of the Registration
Statement respecting shares of VP Capital Appreciation (formerly
known as TCI Growth) (each of the following financial statements
is contained in the Registrant's VP Capital Appreciation
(formerly known as TCI Growth) Annual Report dated December 31,
1996, which is incorporated by reference in Part B of this
Registration Statement):
1. Statement of Assets and Liabilities at December 31, 1996.
2. Statement of Operations for the year ended December 31,
1996.
3. Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995.
4. Notes to Financial Statements as of December 31, 1996 and
1995.
5. Schedule of Investments at December 31, 1996.
6. Independent Accountants' Report dated January 21, 1997.
(iii) Financial Statements filed in Part B of the Registration
Statement respecting shares of VP Balanced (formerly known as
TCI Balanced) (each of the following financial statements is
contained in the Registrant's VP Balanced (formerly known as TCI
Balanced) Annual Report dated December 31, 1996, which is
incorporated by reference in Part B of this Registration
Statement):
1. Statement of Assets and Liabilities at December 31, 1996.
2. Statement of Operations for the year ended December 31,
1996.
3. Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995.
4. Notes to Financial Statements as of December 31, 1996 and
1995.
5. Schedule of Investments at December 31, 1996.
6. Independent Accountants' Report dated January 21, 1997.
(iv) Financial Statements filed in Part B of the Registration
Statement respecting shares of VP Advantage (formerly known as
TCI Advantage) (each of the following financial statements is
contained in the Registrant's VP Advantage (formerly known as
TCI Advantage) Annual Report dated December 31, 1996, which is
incorporated by reference in Part B of this Registration
Statement):
1. Statement of Assets and Liabilities at December 31, 1996.
2. Statement of Operations for the year ended December 31,
1996.
3. Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995.
4. Notes to Financial Statements as of December 31, 1996 and
1995.
5. Schedule of Investments at December 31, 1996.
6. Independent Accountants' Report dated January 21, 1997.
(v) Financial Statements filed in Part B of the Registration
Statement respecting shares of VP International (formerly known
as TCI International) (each of the following financial
statements is contained in the Registrant's VP International
(formerly known as TCI International) Annual Report dated
December 31, 1996, which is incorporated by reference in Part B
of this Registration Statement):
1. Statement of Assets and Liabilities at December 31, 1996.
2. Statement of Operations for the year ended December 31,
1996.
3. Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995.
4. Notes to Financial Statements as of December 31, 1996 and
1995.
5. Schedule of Investments at December 31, 1996.
6. Independent Accountants' Report dated January 21, 1997.
(vi) Financial Statements filed in Part B of the Registration
Statement respecting shares of VP Value (formerly known as TCI
Value) (each of the following financial statements is contained
in the Registrant's VP Value (formerly known as TCI Value)
Annual Report dated December 31, 1996, which is incorporated by
reference in Part B of this Registration Statement):
1. Statement of Assets and Liabilities at December 31, 1996.
2. Statement of Operations for the year ended December 31,
1996.
3. Statement of Changes in Net Assets for the year ended
December 31, 1996.
4. Notes to Financial Statements as of December 31, 1996.
5. Schedule of Investments at December 31, 1996.
6. Independent Accountants' Report dated January 21, 1997.
(b) Exhibits.
1.1 Articles of Incorporation of TCI Portfolios, Inc. dated
June 3, 1987 (filed electronically as Exhibit 1.1 to
Post-Effective Amendment No. 17 on Form N-1A, File No.
33-14567, accession #814680-96-000002, and incorporated
herein by reference).
1.2 Articles of Amendment of TCI Portfolios, Inc. dated July
22, 1988 (filed electronically as Exhibit 1.2 to
Post-Effective Amendment No. 17 on Form N-1A, File No.
33-14567, accession #814680-96-000002, and incorporated
herein by reference).
1.3 Articles of Amendment of TCI Portfolios, Inc. dated
August 11, 1993 (filed electronically as Exhibit 1.3 to
Post-Effective Amendment No. 17 on Form N-1A, File No.
33-14567, accession #814680-96-000002, and incorporated
herein by reference).
1.4 Articles Supplementary of TCI Portfolios, Inc., dated
November 30, 1992 (filed electronically as Exhibit 1.4
to Post-Effective Amendment No. 18 on Form N-1A, File
No. 33-14567, accession #814680-96-000007, and
incorporated herein by reference).
1.5 Articles Supplementary of TCI Portfolios, Inc., dated
April 24, 1995 (filed electronically as Exhibit 1.5 to
Post-Effective Amendment No. 18 on Form N-1A, File No.
33-14567, accession #814680-96-000007, and incorporated
herein by reference).
1.6 Articles Supplementary of TCI Portfolios, Inc., dated
March 11, 1996 (filed electronically as Exhibit 1.6 to
Post-Effective Amendment No. 17 on Form N-1A, File No.
33-14567, and incorporated herein by reference).
1.7 Articles of Amendment of TCI Portfolios, Inc., dated
April 1, 1997 (filed herewith as EX-99.B1.7).
1.8 Form of Articles Supplementary of American Century
Variable Portfolios, Inc., dated May 1, 1997 (filed
herewith as EX-99.B1.8).
2. Amended and Restated By-Laws of TCI Portfolios, Inc.
(filed as Exhibit 2 to Post-Effective Amendment No. 17
on Form N-1A, File No. 33-14567, accession
#814680-96-000002, and incorporated herein by
reference).
3. Voting Trust Agreements - None.
4. Specimen Securities - None.
5.1 Investment Management Agreement between TCI Portfolios,
Inc. and Investors Research Corporation dated August 1,
1994 (filed electronically as Exhibit 5 to
Post-Effective Amendment No. 17 on Form N-1A, File No.
33-14567, accession #814680-96-000002, and incorporated
herein by reference).
5.2 Addendum to Investment Management Agreement dated April
1, 1996, between TCI Portfolios, Inc. and Investors
Research Corporation (filed electronically as Exhibit
5.2 to Post-Effective Amendment No. 18 on Form N-1A,
File No. 33-14567, accession #814680-96-000007, and
incorporated herein by reference).
6. Distribution Agreement between TCI Portfolios, Inc.,
Twentieth Century Capital Portfolios, Inc., Twentieth
Century Investors, Inc., Twentieth Century Premium
Reserves, Inc., Twentieth Century Strategic Asset
Allocations, Inc., Twentieth Century World Investors,
Inc. and Twentieth Century Securities, Inc. dated
September 3, 1996. (filed electronically as Exhibit 6 to
Post-Effective Amendment No. 75 on Form N-1A of
Twentieth Century Investors, Inc., File No. 2-14213, and
incorporated herein by reference).
7. Bonus and Profit Sharing Plan, Etc. - None.
8.1 Custody Agreement with UMB Bank, N.A.(filed as Exhibit
8.2 to Post-Effective Amendment No. 17, File No.
33-14567, accession #814680-96-000002, and incorporated
herein by reference).
8.2 Amendment No. 1 to Custody Agreement with UMB Bank,
N.A., dated January 25, 1996 (filed electronically as a
part of Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A of the Registrant,
File No. 33-39242, filed March 29, 1996 and incorporated
herein by reference).
8.3 Master Agreement by and between Twentieth Century
Services, Inc. and Commerce Bank, N. A. dated January
22, 1997 (filed electronically as a part of
Post-Effective Amendment No. 76 to the Registration
Statement on Form N-1A of American Century Mutual Funds,
Inc., File No. 2-14213, filed February 28, 1997 and
incorporated herein by reference).
8.4 Global Custody Agreement between The Chase Manhattan
Bank and the Twentieth Century and Benham Funds, dated
August 9, 1996 (filed electronically as a part of
Post-Effective Amendment No. 31 to the Registration
Statement on Form N-1A of American Century Government
Income Trust, File No. 2-99222, filed February 7, 1997,
and incorporated herein by reference).
9. Transfer Agency Agreement with Twentieth Century
Services, Inc. (formerly J.E. Stowers & Company) dated
October 15, 1987 (filed as Exhibit 9 to Post-Effective
Amendment No. 19 on Form N-1A, File No. 33-14567, and
incorporated herein by reference).
10. Opinion and Consent of Janet A. Nash, Esq. (filed
herewith as EX-99.B10).
11. Consent of Baird, Kurtz & Dobson (filed herewith as
EX-99.B11).
12.1 Annual Report of VP Capital Appreciation (formerly known
as TCI Growth) for the year ended December 31, 1996
(filed February 25, 1997, File No. 33-14567, accession
#814680-97-000001, and incorporated herein by
reference).
12.2 Annual Report of VP Balanced (formerly known as TCI
Balanced) for the year ended December 31, 1996 (filed
February 25, 1997, File No. 33-14567, accession
#814680-97-000001, and incorporated herein by
reference).
12.3 Annual Report of VP Advantage (formerly known as TCI
Advantage) for the year ended December 31, 1996 (filed
February 25, 1997, File No. 33-14567, accession
#814680-97-000001, and incorporated herein by
reference).
12.4 Annual Report of VP International (formerly known as TCI
International) for the year ended December 31, 1996
(filed February 25, 1997, File No. 33-14567, accession
#814680-97-000001, and incorporated herein by
reference).
12.5 Annual Report of VP Value (formerly known as TCI Value)
for the year ended December 31, 1996 (filed February 25,
1997, File No. 33-14567, accession #814680-97-000001,
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 (filed herewith as EX-99.B16).
17. Power of Attorney (filed herewith as EX-99.B17).
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 March 31, 1997
--------------- -----------------------
VP Capital Appreciation (formerly known as TCI Growth) 29
VP Balanced (formerly known as TCI Balanced) 15
VP Advantage (formerly known as TCI Advantage) 3
VP International (formerly known as TCI International) 9
VP Value (formerly known as TCI Value) 6
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.
ITEM 28. Business and Other Connections of Investment Advisor.
American Century Investment Management, Inc., the investment advisor,
is engaged in the business of managing investments for 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, American Century Services
Corporation and American Century Investment Management, Inc., all
located at American Century Tower, 4500 Main Street, Kansas City,
Missouri 64111.
ITEM 31. Management Services - None.
ITEM 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) 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, American Century Variable Portfolios, Inc., the
Registrant, certifies that it meets all the requirements for effectiveness of
the Post-Effective Amendment No. 20 to its Registration Statement on Form N-1A
pursuant to Rule 485(b) promulgated under the Securities Act of 1933, as
amended, and has duly caused this Post-Effective Amendment No. 20 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Kansas City, State of Missouri on the 28th day
of April, 1997.
American Century Variable 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. 20 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 April 28, 1997
James E. Stowers, Jr. Principal Executive Officer
/s/ James E. Stowers III President and Director April 28, 1997
James E. Stowers III
*Robert T. Jackson Executive Vice President April 28, 1997
Robert T. Jackson and Principal Financial Officer
*Maryanne Roepke Vice President, Treasurer and April 28, 1997
Maryanne Roepke Principal Accounting Officer
*Thomas A. Brown Director April 28, 1997
Thomas A. Brown
*Robert W. Doering, M.D. Director April 28, 1997
Robert W. Doering, M.D.
*Linsley L. Lundgaard Director April 28, 1997
Linsley L. Lundgaard
*Donald H. Pratt Director April 28, 1997
Donald H. Pratt
*Lloyd T. Silver, Jr. Director April 28, 1997
Lloyd T. Silver, Jr.
*M. Jeannine Strandjord Director April 28, 1997
M. Jeannine Strandjord
*D. D. ("Del") Hock Director April 28, 1997
D. D. ("Del") Hock
*By/s/ James E. Stowers III
James E. Stowers III
Attorney-in-Fact
EXHIBIT INDEX
Exhibit Description of Document
Number
EX-99.B1.1 Articles of Incorporation of TCI Portfolios, Inc. dated June 3,
1987 (filed as Exhibit 1.1 to Post-Effective Amendment No. 17 to
the Registration Statement on Form N-1A of the Registrant, File
No. 33-14567, accession #814680-96-000002, and incorporated
herein by reference).
EX-99.B1.2 Articles of Amendment of TCI Portfolios, Inc. dated July 22,
1988 (filed as Exhibit 1.2 to Post-Effective Amendment No. 17 to
the Registration Statement on Form N-1A of the Registrant, File
No. 33-14567, accession #814680-96-000002, and incorporated
herein by reference).
EX-99.B1.3 Articles of Amendment of TCI Portfolios, Inc. dated August 11,
1993 (filed as Exhibit 1.3 to Post-Effective Amendment No. 17 to
the Registration Statement on Form N-1A of the Registrant, File
No. 33-14567, accession #814680-96-000002, and incorporated
herein by reference).
EX-99.B1.4 Articles Supplementary of TCI Portfolios, Inc., dated November
30, 1992 (filed as Exhibit 1.4 to Post-Effective Amendment No.
18 to the Registration Statement on Form N-1A of the Registrant,
File No. 33-14567, accession #814680-96-000007, and incorporated
herein by reference).
EX-99.B1.5 Articles Supplementary of TCI Portfolios, Inc., dated April 24,
1995 (files as Exhibit 1.5 to Post-Effective Amendment No. 18 to
the Registration Statement on Form N-1A of the Registrant, File
No. 33-14467, accession #814680-96-000007, and incorporated
herein by reference).
EX-99.B1.6 Articles Supplementary of TCI Portfolios, Inc., dated March 11,
1996 (filed as Exhibit 1.6 to Post-Effective Amendment No. 17 to
the Registration Statement on Form N-1A of the Registrant, File
No. 33-14567, and incorporated herein by reference).
EX-99.B1.7 Articles of Amendment of TCI Portfolios, Inc., dated April 1,
1997 is included herein.
EX-99.B1.8 Form of Articles Supplementary of American Century Variable
Portfolios, Inc. dated May 1, 1997 is included herein.
EX-99.B2 Amended and Restated By-Laws of TCI Portfolios, Inc.(filed as
Exhibit 2 to Post-Effective Amendment No. 17 to the Registration
Statement on Form N-1A of the Registrant, File No. 33-14567,
accession #814680-96-000002, and incorporated herein by
reference).
EX-99.B5.1 Investment Management Agreement between TCI Portfolios, Inc. and
Investors Research Corporation dated August 1, 1994 (filed as
Exhibit 5 to Post-Effective Amendment No. 17 to the Registration
Statement on Form N-1A of the Registrant, File No. 33-14567,
accession #814680-96-000002, and incorporated herein by
reference).
EX-99.B5.2 Addendum to Investment Management Agreement dated April 1, 1996,
between TCI Portfolios, Inc. and Investors Research Corporation
(filed as Exhibit 5.2 to Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A of the Registrant, File No.
33-14567, accession #814680-96-000007, and incorporated herein
by reference).
EX-99.B6 Distribution Agreement between TCI Portfolios, Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Investors,
Inc., Twentieth Century Premium Reserves, Inc., Twentieth
Century Strategic Asset Allocations, Inc., Twentieth Century
World Investors, Inc. and Twentieth Century Securities, Inc.
dated September 3, 1996. (filed as Exhibit 6 to the Registration
Statement on Form N-1A of Twentieth Century Investors, Inc.,
File No. 2-14213, accession #100334-96-000011 and incorporated
herein by reference).
EX-99.B8.1 Custody Agreement dated September 12, 1995, with UMB Bank,
N.A.(filed as Exhibit 8.2 to Post-Effective Amendment No. 17,
File No. 33-14567, accession #814680-96-000002, and incorporated
herein by reference).
EX-99.B8.2 Amendment No. 1 to Custody Agreement with UMB Bank, N.A. dated
January 25, 1996 (filed as Exhibit 8b to Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A of
the Registrant, File No. 33-39242, filed March 29, 1996 and
incorporated herein by reference).
EX-99.B8.3 Master Agreement by and between Twentieth Century Services, Inc.
and Commerce Bank, N. A. dated January 22, 1997 (filed as
Exhibit B8e to Post-Effective Amendment No. 76 to the
Registration Statement on Form N-1A of American Century Mutual
Funds, Inc., File No. 2-14213, filed February 28, 1997 and
incorporated herein by reference).
EX-99.B8.4 Global Custody Agreement between The Chase Manhattan Bank and
the Twentieth Century and Benham Funds, dated August 9, 1996
(filed as Exhibit B8 to Post-Effective Amendment No. 31 to the
Registration Statement on Form N-1A of American Century
Government Income Trust, File No. 2-99222, filed February 7,
1997, and incorporated herein by reference).
EX-99.B9 Transfer Agency Agreement with Twentieth Century Services, Inc.
(formerly J. E. Stowers & Company) dated October 15, 1987 (filed
as Exhibit 9 to Post-Effective Amendment No. 19 to the
Registration Statement on Form N-1A of the Registrant, File No.
33-14567, and incorporated herein by reference).
EX-99.B10 Opinion and Consent of Janet A. Nash, Esq.
EX-99.B11 Consent of Baird, Kurtz & Dobson.
EX-99.B12.1 Annual Report of VP Capital Appreciation (formerly known as TCI
Growth) for the year ended December 31, 1996 (filed February 25,
1997, File No. 33-14567, accession #814680-97-000001, and
incorporated herein by reference).
EX-99.B12.2 Annual Report of VP Balanced (formerly known as TCI Balanced)
for the year ended December 31, 1996 (filed February 25, 1997,
File No. 33-14567, accession #814680-97-000001, and incorporated
herein by reference).
EX-99.B12.3 Annual Report of VP Advantage (formerly known as TCI Advantage)
for the year ended December 31, 1996 (filed February 25, 1997,
File No. 33-14567, accession #814680-97-000001, and incorporated
herein by reference).
EX-99.B12.4 Annual Report of VP International (formerly known as TCI
International) for the year ended December 31, 1996 (filed
February 25, 1997, File No. 33-14567, accession
#814680-97-000001, and incorporated herein by reference).
EX-99.B12.5 Annual Report of VP Value (formerly known as TCI Value) for the
year ended December 31, 1996 (filed February 25, 1997, File No.
33-14567, accession #814680-97-000001, and incorporated herein
by reference).
EX-99.B16 Schedule of Computation for Performance Advertising Quotations.
EX-99.B17 Power of Attorney dated February 15, 1997 is included herein.
EX-27.1.1 Financial Data Schedule for American Century VP Capital
Appreciation.
EX-27.7.2 Financial Data Schedule for American Century VP Balanced.
EX-27.7.3 Financial Data Schedule for American Century VP Advantage.
EX-27.1.4 Financial Data Schedule for American Century VP International.
EX-27.1.5 Financial Data Schedule for American Century VP Value.
ARTICLES OF AMENDMENT
OF
TCI PORTFOLIOS, INC.
The undersigned, Patrick A. Looby, in accordance with the Maryland
General Corporation Law, 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, which was approved as of November 23, 1996 by the
Board of Directors of the Corporation at a meeting pursuant to
Section 2-605(a)(4) of the Maryland General Corporation Law,
is as follows:
The Articles of Incorporation of the Corporation are hereby amended by
deleting all of the present Article SECOND and inserting in lieu therefor the
following Article SECOND:
"SECOND: The name of the Corporation is
American Century Variable Portfolios, Inc."
3. The amendment shall be effective May 1, 1997.
IN WITNESS WHEREOF, the undersigned hereby acknowledges that these
Articles of Amendment are the act of the Corporation and states, that to the
best of his knowledge, information and belief, the matters and facts stated
herein are true in all material respects, and that this statement is made under
penalties of perjury.
Dated this 1st day of April, 1997.
/s/ Patrick A. Looby
Patrick A. Looby
Vice President
Witness:
/s/ Charles A. Etherington
Charles A. Etherington
Assistant Secretary
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
ARTICLES SUPPLEMENTARY
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., a Maryland corporation
whose principal Maryland office is located in Baltimore, Maryland (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
SECOND: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 2-605(a)(4) of the Maryland General
Corporation Law, the Board of Directors of the Corporation has renamed the duly
established and allocated series of the Corporation's stock as follows:
New Series Name Prior Series Name
--------------- -----------------
American Century VP Value TCI Value
American Century VP International TCI International
American Century VP Capital Appreciation TCI Growth
American Century VP Balanced TCI Balanced
American Century VP Advantage TCI Advantage
The name changes shall be effective on May 1, 1997.
THIRD: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to serialize, classify or
reclassify and issue any unissued shares of any Series or Class or any unissued
shares that have not been allocated to a Series or Class, and to fix or alter
all terms thereof, to the full extent provided by the Articles of Incorporation
of the Corporation.
FOURTH: A description of the series and classes of shares, including
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions for
redemption is set forth in the Articles of Incorporation of the Corporation and
is not changed by these Articles Supplementary, except with respect to the
creation and/or designation of the various Series.
FIFTH: The Board of Directors of the Corporation duly adopted
resolutions renaming the Series, as set forth in Article SECOND.
IN WITNESS WHEREOF, AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. has
caused these Articles Supplementary to be signed and acknowledged in its name
and on its behalf by its Vice President and its corporate seal to be hereunto
affixed and attested to by its Secretary on this 1st day of May, 1997.
AMERICAN CENTURY VARIABLE
ATTEST: PORTFOLIOS, INC.
/s/ Charles A. Etherington /s/ Patrick A. Looby
Name: Charles A. Etherington Name: Patrick A. Looby
Title: Assistant Secretary Title: Vice President
<PAGE>
THE UNDERSIGNED Vice President of AMERICAN CENTURY VARIABLE PORTFOLIOS,
INC., who executed on behalf of said Corporation the foregoing Articles
Supplementary to the Charter, of which this certificate is made a part, hereby
acknowledges, in the name of and on behalf of said Corporation, the foregoing
Articles Supplementary to the Charter to be the corporate act of said
Corporation, and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects under the penalties of
perjury.
Dated: May 1, 1997 /s/ Patrick A. Looby
Patrick A. Looby, Vice President
Janet A. Nash
Attorney at Law
4500 Main Street * P.O. Box 418210
Kansas City, Missouri 64141-9210
April 28, 1997
American Century Variable Portfolios, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
Ladies and Gentlemen:
As counsel to American Century Variable 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. 20 to its Registration Statement on Form N-1A, to be filed with
the Securities and Exchange Commission on April 28, 1997, will, when issued, be
validly issued, fully paid and nonassessable.
For the record, it should be stated that I am an employee of American
Century Services Corporation, an affiliated corporation of American Century
Investment Management, Inc., the investment advisor of the Corporation.
I hereby consent to the use of this opinion as an exhibit to Post-
Effective Amendment No. 20.
Very truly yours,
/s/Janet A. Nash
Janet A. Nash
BAIRD, KURTZ & DOBSON
Certified Public Accountants
City Center Square * Suite 2700
1100 Main Street
Kansas City, Missouri 64105
Telephone (816) 221-6300
Fax (816)221-6380
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
American Century Variable Portfolios, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111
We hereby consent to the use in this Post-Effective Amendment No. 20 to the
Registration Statement under the Securities Act of 1933 and this Amendment No.
20 to the Registration Statement under the Investment Company Act of 1940, both
on Form N-1A, of our report dated January 21, 1997, accompanying and pertaining
to the financial statements of VP Capital Appreciation , VP Balanced , VP
Advantage, VP Value , and VP International , each a series of American Century
Variable Portfolios, Inc. , as of December 31, 1996, which are included in such
Post-Effective Amendments.
/s/ BAIRD, KURTZ & DOBSON
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
April 28, 1997
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 American Century Variable Portfolios, Inc.
1. Average annual total return. The average one-year annual total
return of VP Advantage (formerly known as TCI Advantage) as quoted in
the Statement of Additional Information, was 9.25%.
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, 1996.
1,000 (1+T)1 = $1,092.50
1
(1,092.50)
T = ----------- - 1
(1,000)
T = 9.25%
2. Cumulative total return. The cumulative total return of VP Advantage
(formerly known as TCI Advantage) from August 1, 1991 (inception) to
December 31, 1996 as quoted in the Statement of Additional Information,
was 50.80%
This return was calculated as follows:
P
C = (ERV - 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, 1996.
(1,508.00 - 1,000)
C = ------------------
1,000
C = 50.80%
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 15th day of February, 1997.
TCI PORTFOLIOS, INC.
By: /s/ James E. Stowers III
James E. Stowers III, President
SIGNATURE AND TITLE
/s/ James E. Stowers, Jr. /s/ Robert W. Doering
James E. Stowers, Jr. Robert W. Doering, M.D.
Chairman and Director Director
/s/ James E. Stowers III /s/ Linsley L. Lundgaard
James E. Stowers III Linsley L. Lundgaard
President, Director and Director
Principal Executive Officer
/s/ Robert T. Jackson /s/ Donald H. Pratt
Robert T. Jackson Donald H. Pratt
Executive Vice President, Director
Principal Financial Officer
/s/ Maryanne Roepke /s/ Lloyd T. Silver
Maryanne Roepke Lloyd T. Silver
Vice President and Treasurer, Director
Principal Accounting Officer
/s/ Thomas A. Brown /s/ M. Jeannine Strandjord
Thomas A. Brown M. Jeannine Strandjord
Director Director
Attest: /s/ D.D. ("Del") Hock
D.D. ("Del") Hock
By: /s/ Patrick A. Looby Director
Patrick A. Looby, Secretary
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> VP Capital Appreciation - 1996 PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,164,757,959
<INVESTMENTS-AT-VALUE> 1,320,758,830
<RECEIVABLES> 2,570,401
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,323,329,231
<PAYABLE-FOR-SECURITIES> 4,860,172
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,604,008
<TOTAL-LIABILITIES> 9,464,180
<SENIOR-EQUITY> 1,283,435
<PAID-IN-CAPITAL-COMMON> 1,133,927,736
<SHARES-COMMON-STOCK> 128,343,528
<SHARES-COMMON-PRIOR> 121,135,825
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22,653,009
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 156,000,871
<NET-ASSETS> 1,313,865,051
<DIVIDEND-INCOME> 3,185,163
<INTEREST-INCOME> 2,715,775
<OTHER-INCOME> 0
<EXPENSES-NET> 14,414,632
<NET-INVESTMENT-INCOME> (8,513,694)
<REALIZED-GAINS-CURRENT> 32,772,249
<APPREC-INCREASE-CURRENT> (86,371,388)
<NET-CHANGE-FROM-OPS> (62,112,833)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 165,281,584
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,440,930
<NUMBER-OF-SHARES-REDEEMED> 41,183,203
<SHARES-REINVESTED> 16,949,976
<NET-CHANGE-IN-ASSETS> (147,258,603)
<ACCUMULATED-NII-PRIOR> (751,266)
<ACCUMULATED-GAINS-PRIOR> 163,386,583
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,401,981
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14,414,632
<AVERAGE-NET-ASSETS> 1,444,414,188
<PER-SHARE-NAV-BEGIN> 12.06
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> (0.40)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.36
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.24
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> VP BALANCED - 1996 PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 186,429,636
<INVESTMENTS-AT-VALUE> 211,533,788
<RECEIVABLES> 4,728,982
<ASSETS-OTHER> 63,216
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216,325,986
<PAYABLE-FOR-SECURITIES> 681,148
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 251,754
<TOTAL-LIABILITIES> 932,902
<SENIOR-EQUITY> 285,596
<PAID-IN-CAPITAL-COMMON> 178,994,055
<SHARES-COMMON-STOCK> 28,559,573
<SHARES-COMMON-PRIOR> 21,857,694
<ACCUMULATED-NII-CURRENT> 1,399,954
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,609,607
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,103,872
<NET-ASSETS> 215,393,084
<DIVIDEND-INCOME> 1,047,851
<INTEREST-INCOME> 5,289,821
<OTHER-INCOME> 0
<EXPENSES-NET> 1,833,753
<NET-INVESTMENT-INCOME> 4,503,919
<REALIZED-GAINS-CURRENT> 9,871,687
<APPREC-INCREASE-CURRENT> 7,482,658
<NET-CHANGE-FROM-OPS> 21,858,264
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,340,445
<DISTRIBUTIONS-OF-GAINS> 4,846,873
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,704,328
<NUMBER-OF-SHARES-REDEEMED> 2,170,655
<SHARES-REINVESTED> 1,168,206
<NET-CHANGE-IN-ASSETS> 61,569,914
<ACCUMULATED-NII-PRIOR> 62,692
<ACCUMULATED-GAINS-PRIOR> 4,758,581
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,832,133
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,833,753
<AVERAGE-NET-ASSETS> 185,726,034
<PER-SHARE-NAV-BEGIN> 7.04
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 0.65
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 0.20
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.54
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> VP ADVANTAGE - 1996 PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 22,694,577
<INVESTMENTS-AT-VALUE> 24,885,464
<RECEIVABLES> 345,519
<ASSETS-OTHER> 90,620
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,321,603
<PAYABLE-FOR-SECURITIES> 52,756
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,939
<TOTAL-LIABILITIES> 91,696
<SENIOR-EQUITY> 40,117
<PAID-IN-CAPITAL-COMMON> 21,446,215
<SHARES-COMMON-STOCK> 4,011,706
<SHARES-COMMON-PRIOR> 3,883,369
<ACCUMULATED-NII-CURRENT> 211,117
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,341,599
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,190,860
<NET-ASSETS> 25,229,908
<DIVIDEND-INCOME> 95,355
<INTEREST-INCOME> 902,005
<OTHER-INCOME> 0
<EXPENSES-NET> 238,599
<NET-INVESTMENT-INCOME> 758,761
<REALIZED-GAINS-CURRENT> 1,368,192
<APPREC-INCREASE-CURRENT> 48,325
<NET-CHANGE-FROM-OPS> 2,175,278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 583,561
<DISTRIBUTIONS-OF-GAINS> 1,133,859
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 238,512
<NUMBER-OF-SHARES-REDEEMED> 398,378
<SHARES-REINVESTED> 288,203
<NET-CHANGE-IN-ASSETS> 1,192,621
<ACCUMULATED-NII-PRIOR> 18,848
<ACCUMULATED-GAINS-PRIOR> 1,124,335
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238,392
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 238,599
<AVERAGE-NET-ASSETS> 24,477,270
<PER-SHARE-NAV-BEGIN> 6.19
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> 0.15
<PER-SHARE-DISTRIBUTIONS> 0.29
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.29
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> VP INTERNATIONAL - 1996 PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 90,084,449
<INVESTMENTS-AT-VALUE> 100,279,982
<RECEIVABLES> 2,409,314
<ASSETS-OTHER> 228,310
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 102,917,606
<PAYABLE-FOR-SECURITIES> 1,266,472
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 315,951
<TOTAL-LIABILITIES> 1,582,423
<SENIOR-EQUITY> 170,048
<PAID-IN-CAPITAL-COMMON> 86,918,558
<SHARES-COMMON-STOCK> 17,004,837
<SHARES-COMMON-PRIOR> 9,676,421
<ACCUMULATED-NII-CURRENT> 1,422,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,674,107
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,149,953
<NET-ASSETS> 101,335,183
<DIVIDEND-INCOME> 1,060,086
<INTEREST-INCOME> 373,907
<OTHER-INCOME> 0
<EXPENSES-NET> 1,171,578
<NET-INVESTMENT-INCOME> 262,415
<REALIZED-GAINS-CURRENT> 4,021,576
<APPREC-INCREASE-CURRENT> 6,792,807
<NET-CHANGE-FROM-OPS> 11,076,798
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,207,965
<DISTRIBUTIONS-OF-GAINS> 402,655
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,365,530
<NUMBER-OF-SHARES-REDEEMED> 8,329,954
<SHARES-REINVESTED> 292,840
<NET-CHANGE-IN-ASSETS> 49,726,246
<ACCUMULATED-NII-PRIOR> 1,142,475
<ACCUMULATED-GAINS-PRIOR> 280,778
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,170,843
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,171,578
<AVERAGE-NET-ASSETS> 78,092,615
<PER-SHARE-NAV-BEGIN> 5.33
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.74
<PER-SHARE-DIVIDEND> 0.10
<PER-SHARE-DISTRIBUTIONS> 0.03
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.96
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> VP VALUE - 1996 PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 22,644,588
<INVESTMENTS-AT-VALUE> 23,717,106
<RECEIVABLES> 715,438
<ASSETS-OTHER> 799,023
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,231,567
<PAYABLE-FOR-SECURITIES> 1,318,991
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,713
<TOTAL-LIABILITIES> 1,337,704
<SENIOR-EQUITY> 42,788
<PAID-IN-CAPITAL-COMMON> 22,264,517
<SHARES-COMMON-STOCK> 4,278,765
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 84,814
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 430,732
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,071,012
<NET-ASSETS> 23,893,863
<DIVIDEND-INCOME> 165,970
<INTEREST-INCOME> 19,137
<OTHER-INCOME> 0
<EXPENSES-NET> 62,235
<NET-INVESTMENT-INCOME> 122,872
<REALIZED-GAINS-CURRENT> 434,897
<APPREC-INCREASE-CURRENT> 1,071,012
<NET-CHANGE-FROM-OPS> 1,628,781
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 42,223
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,494,002
<NUMBER-OF-SHARES-REDEEMED> 223,494
<SHARES-REINVESTED> 8,257
<NET-CHANGE-IN-ASSETS> 23,893,863
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62,187
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62,235
<AVERAGE-NET-ASSETS> 9,241,069
<PER-SHARE-NAV-BEGIN> 5.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.56
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.58
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
