PROSPECTUS
[american century logo(reg.sm)]
American
Century(reg.tm)
JULY 30, 1998
AMERICAN
CENTURY
GROUP
Small Cap Quantitative
INVESTOR CLASS
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
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Benham American Century Twentieth Century
Group Group Group
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MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Small Cap Quantitative
PROSPECTUS
JULY 30, 1998
Small Cap Quantitative
INVESTOR CLASS
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
American Century Quantitative Equity Funds is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. One of the funds from our
American Century Group of funds is described in this Prospectus. Its investment
objective is listed on page 2 of this Prospectus. The other funds are described
in separate prospectuses.
Through its Investor Class of shares, American Century offers investors a
full line of no-load funds, investments that have no sales charges or
commissions.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated July 30, 1998, 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 * P.O. Box 419200
Kansas City, Missouri 64141-6200 * 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 * In Missouri: 816-444-3485
www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY SMALL CAP QUANTITATIVE FUND
Small Cap Quantitative seeks long-term capital appreciation by investing
primarily in equity securities of small companies.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 INVESTMENT OBJECTIVE AMERICAN CENTURY INVESTMENTS
TABLE OF CONTENTS
Investment Objective of the Fund .......................................... 2
Transaction and Operating Expense Table ................................... 4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ........................................... 5
Risk Factors and Investment Techniques .................................... 5
Other Investment Practices, Their Characteristics
and Risks ............................................................... 6
Portfolio Turnover .................................................... 6
Convertible Securities ................................................ 6
Futures Contracts and Options Thereon ................................. 6
Short-Term Instruments ................................................ 6
Foreign Securities .................................................... 7
Other Techniques ...................................................... 7
Performance Advertising ................................................... 7
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments .............................................. 9
Investing in American Century ............................................. 9
How to Open an Account .................................................... 9
By Mail .......................................................... 9
By Wire .......................................................... 9
By Exchange ...................................................... 10
In Person ........................................................ 10
Subsequent Investments ................................................ 10
By Mail .......................................................... 10
By Telephone ..................................................... 10
By Online Access ................................................. 10
By Wire .......................................................... 10
In Person ........................................................ 10
Automatic Investment Plan ............................................. 10
How to Exchange from One Account to Another ............................... 11
By Mail .......................................................... 11
By Telephone ..................................................... 11
By Online Access ................................................. 11
How to Redeem Shares ...................................................... 11
By Mail .......................................................... 11
By Telephone ..................................................... 11
By Check-A-Month ................................................. 11
Other Automatic Redemptions ...................................... 11
Redemption Proceeds ................................................... 11
By Check ......................................................... 11
By Wire and ACH .................................................. 12
Redemption of Shares in Low-Balance Accounts .......................... 12
Signature Guarantee ....................................................... 12
Special Shareholder Services .............................................. 12
Automated Information Line ....................................... 12
Online Account Access ............................................ 12
Open Order Service ............................................... 12
Tax-Qualified Retirement Plans ................................... 13
Important Policies Regarding Your Investments ............................. 13
Reports to Shareholders ................................................... 14
Employer-Sponsored Retirement Plans and
Institutional Accounts ................................................. 14
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ............................................................... 15
When Share Price Is Determined ........................................ 15
How Share Price Is Determined ......................................... 15
Where to Find Information About Share Price ........................... 16
Distributions ............................................................. 16
Taxes ..................................................................... 17
Tax-Deferred Accounts ................................................. 17
Taxable Accounts ...................................................... 17
Management ................................................................ 18
Investment Management ................................................. 18
Code of Ethics ........................................................ 19
Transfer and Administrative Services .................................. 19
Year 2000 Issues ...................................................... 19
Distribution of Fund Shares ............................................... 20
Further Information About American Century ................................ 20
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
Small Cap
Quantitative
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases ........................... none
Maximum Sales Load Imposed on Reinvested Dividends ................ none
Deferred Sales Load ............................................... none
Redemption Fee(1) ................................................. none
Exchange Fee ...................................................... none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees(2) ................................................ 0.90%
12b-1 Fees ........................................................ none
Other Expenses(3) ................................................. 0.01%
Total Fund Operating Expenses ..................................... 0.91%
EXAMPLE
You would pay the following expenses 1 year $ 9
on a $1,000 investment, assuming a 3 years 29
5% annual return and redemption at 5 years 50
the end of each time period: 10 years 112
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.
(2) A portion of the management fee may be paid by American Century Investment
Management, Inc. (the manager) to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed
by an affiliate of the manager. See "Management - Transfer and
Administrative Services," page 19.
(3) Other Expenses include the fees and expenses of the fund's independent
directors, their legal counsel, interest and extraordinary expenses.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the fund offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by SEC
regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Investor Class shares and have no
up-front or deferred sales charges, commissions, or 12b-1 fees. The fund offers
two other classes of shares, primarily to institutional investors, that have
different fee structures than the Investor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class. A
difference in fees will result in different performance for the other classes.
For additional information about the various classes, see "Further Information
About American Century," page 20.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
Small Cap Quantitative's investment objective is to seek long-term capital
appreciation by investing primarily in equity securities of small companies.
Small Cap Quantitative is designed for investors whose financial goals include
long-term capital growth.
The fund will invest primarily in common stocks of smaller companies, as
determined by market capitalization. A company shall be considered to have a
smaller market capitalization if, at the time of investment, it has a market
capitalization that is not greater than the market capitalization of the largest
company contained in the S&P Small Cap 600 Index. The S&P Small Cap 600 Index is
a stock index that tracks the performance of equity securities of smaller
capitalization companies. As of March 31, 1998, the largest company contained in
the S&P Small Cap 600 Index had a market capitalization of approximately $3.7
billion, while the median company contained in the index had a market
capitalization of approximately $554 million.
The manager seeks a total return for Small Cap Quantitative that exceeds the
total return of the S&P 600. Of course, Small Cap Quantitative's total return
may be higher or lower than the S&P 600's return over any period of time.
RISK FACTORS AND INVESTMENT TECHNIQUES
The manager uses quantitative management strategies in pursuit of the fund's
investment objective. Quantitative management combines two investment management
approaches. The first is to rank stocks based on their relative attractiveness.
The attractiveness of a stock is determined analytically by using a computer
model to combine value and growth measures. Examples of value measures include
price to book and price to cash flow ratios while examples of growth measures
include the rate of growth of a company's earnings and changes in analysts'
earnings estimates.
The second approach is to use a technique referred to as portfolio
optimization. Using a computer, the manager constructs a portfolio (i.e. company
names and shares held in each) that seeks the optimal tradeoff between the risk
of the portfolio relative to a benchmark (i.e. the S&P 600) and the expected
return of the portfolio as measured by the stock ranking model.
Approximately 65% of the fund's portfolio holdings will be drawn from equity
securities of companies with a market capitalization within the range of those
which make up the S&P 600. As of March 31, 1998, that capitalization range was
$31 million to $3.7 billion.
The fund's investment approach may cause it to be more heavily invested in
some industries than in others. However, the fund may not invest more than 25%
of its total assets in companies whose principal business activities are in the
same industry. In addition, the fund is a "diversified" investment company as
defined in the Investment Company Act of 1940 (the Investment Company Act). This
means that investments in any single issuer are limited by restrictions in the
Investment Company Act.
The fund may invest in securities or engage in transactions involving
instruments other than equity securities, as discussed in the section titled
"Other Investment Practices, Their Characteristics and Risks," page 6.
PROSPECTUS INFORMATION REGARDING THE FUND 5
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objective.
The manager considers the rate of portfolio turnover when it determines a change
is in order to achieve the objective and, accordingly, under normal conditions
the annual portfolio turnover rate is not anticipated to exceed 150%.
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 that the fund pays directly.
Higher portfolio turnover also may increase the likelihood that the capital
gains, if any, realized and distributed by the fund will include short-term
capital gains, which are taxable as ordinary income. When a security is sold,
the manager seeks whenever possible to minimize the capital gain that would be
realized.
CONVERTIBLE SECURITIES
Although the fund's equity investments consist primarily of common stock,
the fund may buy securities convertible into common stock, such as convertible
bonds, convertible preferred stocks, and warrants. The manager may purchase
these securities if it believes that a company's convertible securities are
undervalued in the market.
FUTURES CONTRACTS AND OPTIONS THEREON
The fund may buy or sell futures contracts relating to groups of securities
or indices and write or buy put and call options relating to such futures
contracts.
For options sold, the fund will segregate cash or appropriate liquid assets
including equity securities and debt securities of any grade equal to the value
of securities underlying the option unless the option is otherwise covered.
The fund will deposit cash or appropriate liquid assets in a segregated
custodial account in an amount equal to the fluctuating market value of long
futures contracts it has purchased, less any margin deposited on its long
position. It may hold cash or acquire such debt obligations for the purpose of
making these deposits.
The fund may use futures and options transactions to maintain cash reserves
while remaining fully invested, to facilitate trading, to reduce transaction
costs, or to pursue higher investment returns when a futures contract is priced
more attractively than its underlying security or index.
Futures contracts and options thereon may subject the fund to greater and
more volatile risks than might otherwise be the case. The principal risks
related to the use of such instruments are (1) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (2) possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need of additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.
The ordinary spreads between prices in the cash and futures markets, due to
the differences in the nature of those markets, are subject to distortion. Due
to the possibility of distortion, a correct forecast of factors, e.g. dividend
yields and short-term interest rates, by the manager may still not result in a
successful transaction. The manager may be incorrect in its expectations as to
the extent of various factor changes or the time span within which the changes
take place.
See the Statement of Additional Information for further information about
these instruments and their risks.
SHORT-TERM INSTRUMENTS
For liquidity purposes, the fund may invest in high-quality money market
instruments with remaining maturities of one year or less.
6 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
The fund also may enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers that are deemed to present
minimal credit risk. Credit risk determinations are made by the manager pursuant
to guidelines established by the Board of Directors. A repurchase agreement
involves the purchase of a security and a simultaneous agreement to sell the
security back to the seller at a higher price. Delays or losses could result if
the party to the agreement defaults or becomes bankrupt.
The fund may invest up to 5% of its total assets in any money market fund
including those advised by the manager, provided that the investment is
consistent with the fund's investment policies and restrictions.
FOREIGN SECURITIES
The fund may invest in securities of foreign issuers, including instruments
that trade on domestic or foreign securities exchanges in U.S. dollars or
foreign currencies. Securities of foreign issuers may be affected by the
strength of foreign currencies relative to the U.S. dollar or by political or
economic developments in foreign countries. Foreign companies may not be subject
to accounting standards or governmental regulations comparable to those that
affect U.S. companies, and there may be less public information about their
operations.
OTHER TECHNIQUES
The manager may buy other types of securities or employ other portfolio
management techniques on behalf of a fund, including reverse repurchase
agreements. When SEC guidelines require it to do so, the fund will set aside
cash or appropriate liquid assets in a segregated account to cover the fund's
obligations.
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund performance
may be shown by presenting one or more performance measurements, including
cumulative total return or average annual total return, yield and effective
yield. Performance data may be quoted separately for the Investor Class and for
the other classes.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period of time
expressed as a percentage of the fund's share price. The effective yield is
calculated in a similar manner, but when annualized, the income earned by the
investment is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect on the assumed
reinvestment.
Yield is calculated by adding over a 30-day (or one-month) period all
interest and dividend income (net of fund expenses) calculated on each day's
market values, dividing this sum by the average number of fund shares
outstanding during the period, and expressing the result as a percentage of the
fund's share price on the last day of the 30-day (or one-month) period. The
percentage is then annualized. Capital gains and losses are not included in the
calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on its shares or the income reported
in the fund's financial statements.
The fund also may include in advertisements data comparing its performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services, Inc.) and publications that monitor the performance
of mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, fund performance
may be compared to well-known indices of market performance. 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 fund performance or
historical or expected volatility or other fund characteristics, may be
presented numerically, graphically or in text.
PROSPECTUS INFORMATION REGARDING THE FUND 7
Fund performance also may be combined or blended with other funds in our fund
family, and that combined or blended performance may be compared to the same
indices to which individual funds may be compared.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
Small Cap Quantitative is a part of the American Century Investments family
of mutual funds. Our family provides a full range of investment opportunities,
from the aggressive equity growth funds in our Twentieth Century Group, to the
fixed income funds in our Benham Group, to the moderate risk and specialty funds
in our American Century Group. Please call 1-800-345-2021 for a brochure or
prospectuses for the other funds in the American Century Investments family.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If you would like additional copies of financial reports and
prospectuses or separate mailing of account statements, please call us.
INVESTING IN AMERICAN CENTURY
The following sections explain how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 14.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You also must certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
The minimum investment is $2,500 [$1,000 for IRA and Uniform Gifts/Transfers
to Minors Acts (UGMA/UTMA) accounts]. These minimums will be waived if you
establish an automatic investment plan to your account that is the equivalent of
at least $50 per month. See "Automatic Investment Plan," page 10.
The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.
Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:
* RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
* BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
* BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 9
* REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
* ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
* BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
* Taxpayer identification or Social Security
number.
* If more than one account, account numbers and amount to be invested in
each account.
* Current tax year, previous tax year or rollover designation if an IRA.
Specify whether traditional IRA, Roth IRA, Education IRA, SEP-IRA,
SARSEP-IRA, SIMPLE Employer or SIMPLE Employee.
BY EXCHANGE
Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information on
opening an account by exchanging from another American Century account. See page
11 for more information on exchanges.
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investor Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
4917 Town Center Drive
Leawood, Kansas 66211
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments is $250 for checks submitted without the investment slip portion of
a previous statement or confirmation and $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the investment
slip portion of a previous statement or confirmation. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Upon completion of your application and once your account is open, you may
make investments by telephone. You may call an Investor Services Representative
or use our Automated Information Line.
BY ONLINE ACCESS
Upon completion of your application and once your account is open, you may
make investments online.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on pages 9-10 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investor
Centers. The locations of our Investor Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
By completing the application and electing to make investments
automatically, we will draw on your bank account regularly. Such investments
must be at least the equivalent of $50 per month. You also may choose an
automatic payroll or government direct deposit. If you are establishing a new
account, check the appropriate box under "Automatic Investments" on your
application to receive more information. If you would like to add a direct
deposit to an existing account, please call an Investor Services Representative.
10 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your fund shares to our other funds up to six times per year per account. An
exchange request will be processed as of the same day it is received, if it is
received before the fund's net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for funds issued by American
Century Target Maturities Trust and at the close of the Exchange for all of our
other funds. See "When Share Price Is Determined," page 15.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line--see page 12) upon
completion and receipt of your application or by calling us at 1-800-345-2021 to
get the appropriate form.
BY ONLINE ACCESS
You can make exchanges online. This service is established upon completion
and receipt of your application or by calling us at 1-800-345-2021 to get the
appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must be
accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 12.
BY TELEPHONE
Upon completion of your application and once your account is open, you may
redeem your shares by calling an Investor Services Representative.
BY CHECK-A-MONTH
If you have at least a $10,000 balance in your account, you may redeem
shares by Check-A-Month. A Check-A-Month plan automatically redeems enough
shares each month to provide you with a check in an amount you choose (minimum
$50). To set up a Check-A-Month plan, please call and request our Check-A-Month
brochure.
OTHER AUTOMATIC REDEMPTIONS
If you have at least a $10,000 balance in your account, you may elect to
make redemptions automatically by authorizing us to send funds to you or to your
account at a bank or other financial institution. To set up automatic
redemptions, call an Investor Services Representative.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 11
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank usually will receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.
REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you to bring the value of the
shares held in the account up to the minimum or to establish an automatic
investment that is the equivalent of at least $50 per month. See "How to Open an
Account," page 9. If action is not taken within 90 days of the letter's date,
the shares held in the account will be redeemed and the proceeds from the
redemption will be sent by check to your address of record. We reserve the right
to increase the investment minimums.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. You can obtain a signature guarantee from a bank or trust
company, credit union, broker-dealer, securities exchange or association,
clearing agency or savings association, as defined by federal law.
For a more in-depth explanation of our signature guarantee policy, or if you
live outside the United States and would like to know how to obtain a signature
guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction, or
to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several services to make your account easier to manage. These are
listed on the account application. You will find more information about each of
these services in our Investor Services Guide.
Our special shareholder services include:
AUTOMATED INFORMATION LINE
We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. You also may exchange shares from one fund to another via the
Automated Information Line. Redemption instructions cannot be given via the
Automated Information Line.
ONLINE ACCOUNT ACCESS
You may contact us 24 hours a day, seven days a week, at
www.americancentury.com to access daily share prices, receive updates on major
market indices and view historical performance of the fund. You can use your
personal access code and Social Security number to view your account balance and
account activity, make subsequent investments from your bank account or exchange
shares from one fund to another.
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be
12 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
adjusted accordingly so the distribution does not inadvertently trigger an open
order transaction on your behalf. If you close or re-register the account from
which the shares are to be redeemed, your open order will be canceled.
Because of their time-sensitive nature, open order transactions are accepted
only by telephone or in person. These transactions are subject to exchange
limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
The fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
* Individual Retirement Accounts (IRAs);
* 403(b) plans for employees of public school
systems and non-profit organizations; or
* Profit sharing plans and pension plans for
corporations and other employers.
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You also can transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares
for a period of time, or to reject any specific purchase order
(including purchases by exchange). Additionally, purchases may be
refused if, in the opinion of the manager, they are of a size that
would disrupt the management of the fund.
(2) We reserve the right to make changes to any stated investment
requirements, including those that relate to purchases, transfers and
redemptions. In addition, we also may alter, add to or terminate any
investor services and privileges. Any changes may affect all
shareholders or only certain series or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open
orders, will be refused. Once you have mailed or otherwise transmitted
your transaction instructions to us, they may not be modified or
canceled.
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require
evidence satisfactory to us of the authority of the individual making
the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These
procedures are designed to protect shareholders from unauthorized or
fraudulent instructions. If we do not employ reasonable procedures to
confirm the genuineness of instructions, then we may be liable for
losses due to unauthorized or fraudulent instructions. The company, its
transfer agent and manager will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as Mary
Elizabeth Jones, she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an
increase in the number of shareholder telephone calls. If you
experience difficulty in reaching us during such periods, you may send
your transaction instructions by mail, express mail or courier service,
or you may visit one of our Investor Centers. You also may use our
Automated Information Line if you have requested and received an access
code and are not attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 13
reduce any redemption proceeds by $50 to cover the penalty the IRS will
impose on us for failure to report your correct taxpayer identification
number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research
fee of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you may
use in completing your U.S. income tax return. See the Investor Services Guide
for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.
14 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares also is referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after our receipt of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents or designees before the time as of
which the net asset value of the fund is determined, are effective on, and will
receive the price determined, that day. Investment, redemption and exchange
requests received thereafter are effective on, and receive the price determined
as of, the close of the Exchange on the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the fund's transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the fund's procedures or any contractual arrangements with the
fund or the fund's distributor in order for you to receive that day's price.
We have contractual relationships with certain financial intermediaries in
which such intermediaries represent that they have systems to track the time at
which investment orders are received and to segregate orders received at
different times. Based on these representations, the fund has authorized such
intermediaries and their designees to accept purchase and redemption orders on
the fund's behalf up to the applicable cut-off time. The fund will be deemed to
have received such orders upon acceptance by the duly authorized intermediary,
and such orders will be priced at the fund's net asset value next determined
after acceptance on the fund's behalf by such intermediary.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges generally are valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 15
value as determined in accordance with procedures adopted by the Board of
Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset value of the Investor Class of the fund is published in
leading newspapers daily. The net asset value may be obtained by calling us or
by accessing our Web site (www.americancentury.com).
DISTRIBUTIONS
Small Cap Quantitative's dividends are declared and paid quarterly in March,
June, September and December.
THE OBJECTIVE OF SMALL CAP QUANTITATIVE IS CAPITAL APPRECIATION AND NOT THE
PRODUCTION OF DISTRIBUTIONS. YOU ARE ENCOURAGED TO MEASURE THE SUCCESS OF YOUR
INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE
DISTRIBUTIONS YOU RECEIVE.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price Is Determined," page 15. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are
declared and paid twice a year, but the fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code, in all events in a manner consistent with the provisions of the
Investment Company Act.
Participants in employer-sponsored retirement or savings plans must reinvest
all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in certain IRAs and 403(b) plans paid
in cash only if you are at least 59 (1)/(2) years old or permanently and totally
disabled. Distribution checks normally are mailed within seven days after the
record date. Please consult our Investor Services Guide for further information
regarding your distribution options.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
fund expenses.
16 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
Because such gains and dividends are included in the price of your shares,
when they are distributed the price of your shares is reduced by the amount of
the distribution. If you buy your shares through a taxable account just before
the distribution, you will pay the full price for your shares, and then receive
a portion of the purchase price back as a taxable distribution. See "Taxes,"
this page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income may
qualify for the 70% dividends received deduction for corporations to the extent
that the fund held shares receiving the dividend for more than 45 days.
Distributions from gains on assets held longer than 12 months but no more than
18 months (28% rate gain) and/or assets held longer than 18 months (20% rate
gain) are taxable as long-term gains regardless of the length of time you have
held the shares. However, you should note that any loss realized upon the sale
or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain (28% or 20% rate gain) to you with respect to such shares.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains (28% and/or 20% rate gain).
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions also may be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed. This charge is not refundable.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 17
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders generally will recognize a gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and generally will be considered long-term, subject to
tax at a maximum rate of 28%, if shareholders have held such shares for a period
of more than 12 months but no more than 18 months and long-term, subject to tax
at a maximum rate of 20%, if shareholders have held such shares for a period of
more than 18 months. If a loss is realized on the redemption of fund shares, the
reinvestment in additional fund shares within 30 days before or after the
redemption may be subject to the "wash sale" rules of the Internal Revenue Code,
resulting in a postponement of the recognition of such loss for federal income
tax purposes.
In addition to the federal income tax consequences described above relating
to an investment in a fund, there may be other federal, state or local tax
considerations that depend upon the circumstances of each particular investor.
Prospective shareholders are therefore urged to consult their tax advisors with
respect to the effect of this investment on their own specific situations.
MANAGEMENT
INVESTMENT MANAGEMENT
The fund is a diversified, open-end series of American Century Quantitative
Equity Funds (the company). Under the laws of the State of California, the Board
of Directors is responsible for managing the business and affairs of the
company. 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 clients 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 it deems appropriate in pursuit of the fund's investment
objective. Individual portfolio manager members of the team also may adjust
portfolio holdings of the fund or of sectors of the fund as necessary between
team meetings. John Schniedwind, Senior Vice President and Group
Leader--Quantitative Equity, supervises the team that manages the fund.
The portfolio manager members of the team managing the fund and their work
experience for the last five years are as follows:
KURT BORGWARDT, Vice President, Portfolio Manager and Director of
Quantitative Equity Research, joined American Century in 1990, and has managed
the quantitative equity research effort since then.
WILLIAM MARTIN, Vice President and Portfolio Manager, joined American
Century in 1989.
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 a monthly fee
based on a percentage of the average net assets of the fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process: First, a
fee rate schedule is applied to the assets of all of the funds in a fund's
investment category that are managed by the manager (the Investment Category
Fee). The three investment categories are: Money Market Funds, Bond Funds and
Equity Funds. Second, a separate fee rate schedule is applied to the assets of
all of the funds managed by the manager (the Complex Fee). The Investment
Category Fee and the Complex Fee are then added to determine the unified
management fee payable by the fund to the manager. Currently, the Investment
Category Fee for the fund is an annual rate of 0.60% of the average net assets
of the fund. The Complex
18 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
Fee is currently an annual rate of 0.30% of the average net assets of the fund.
Further information about the calculation of the annual management fee is
contained in the Statement of Additional Information.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the fund by
the aggregate average daily closing value of the fund's net assets during the
previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolio
obtain preclearance before executing personal trades. 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, American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111, acts as transfer agent and dividend-paying
agent for the fund. It provides facilities, equipment and personnel to the fund,
and is paid for such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the fund as a funding medium, by broker-dealers and financial advisors
for their customers investing in shares of American Century or by sponsors of
multi mutual fund no- or low-transaction fee programs. The manager or an
affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the fund, transactions in shares
of the fund may be executed by brokers or investment advisors who charge a
transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the fund or the
manager. You should be aware of the fact that these transactions may be made
directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager
or its affiliates.
The manager and the transfer agent are both wholly owned by American Century
Companies, Inc. (ACC). James E. Stowers Jr., Chairman of the Board of Directors
of ACC, controls ACC by virtue of his ownership of a majority of its common
stock.
Pursuant to a Sub-Administration Agreement with the manager, Funds
Distributor Inc. (FDI) serves as the co-administrator for the fund. FDI is
responsible for (i) providing certain officers of the fund and (ii) reviewing
and filing marketing and sales literature on behalf of the fund. The fees and
expenses of FDI are paid by the manager.
YEAR 2000 ISSUES
Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. The
fund and the manager depend upon the computer systems of various service
providers, including the transfer agent, for their day-to-day operations.
Inadequate remediation of the Year 2000 problem by these service providers and
others with whom they interact could have an adverse effect on the fund's
operations, including pricing, securities trading and settlement, and the
provision of shareholder services.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 19
The transfer agent, in cooperation with the manager, has assembled a team of
information technology professionals who are taking steps to address Year 2000
issues with respect to its own computers and to obtain satisfactory assurances
that comparable steps are being taken by the fund's and the manager's other
major service providers and vendors. The key phases of the remediation plan
include: an inventory of all internal systems, vendor products and services and
data providers (substantially completed in 1997); an assessment of all systems
for date reliance and the impact of the century rollover on each (substantially
completed with respect to critical systems in early 1998); and the renovation
and testing of affected systems (targeted for completion with respect to
critical systems by the end of 1998). The manager will pay for the remediation
effort with revenues from its management fee, so that the fund will not directly
bear any of the cost.
In light of these remediation efforts, the fund does not anticipate a
material adverse impact on its business or operations. However, there can be no
assurance that the remediation plan will be sufficient and timely or that
interaction with other noncomplying computer systems will not have a material
adverse effect on the fund's business, operations or financial condition.
In addition, the issuers of the securities in which the fund invests may
have Year 2000 computer problems. Although the media and various regulatory
agencies have focused a great deal of attention on the need for issuers to
assess and remediate these problems, their failure to do so could hurt the
fund's performance.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by FDI, a registered broker-dealer. FDI is
a wholly owned indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109. The Investor Class of shares does not pay any commissions or sales loads
to the distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.
Investors may open accounts with American Century only through the
distributor. All purchase transactions in the fund are processed by the transfer
agent, which is authorized to accept any instructions relating to fund accounts.
All purchase orders must be accepted by the distributor. All fees and expenses
of FDI in acting as distributor for the fund are paid by the manager.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Quantitative Equity Funds is an 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 419200, Kansas City, Missouri 64141-6200. All inquiries may be
made by mail to that address, or by telephone at 1-800-345-2021 (international
calls: 816-531-5575).
American Century Quantitative Equity Funds issues shares with no par value.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian and in effect each series
is a separate fund.
American Century offers three classes of the fund: an Investor Class, an
Institutional Class and an Advisor Class. The shares offered by this Prospectus
are Investor Class shares and have no up-front charges, commissions or 12b-1
fees.
The other classes of shares are primarily offered to institutional investors
or through institutional distribution channels, such as employer-sponsored
retirement plans or through banks, broker-dealers, insurance companies or other
financial intermediaries. The other classes have different fees, expenses,
and/or minimum investment requirements than the Investor Class. The difference
in the fee structures among the classes is the result of their separate
arrangements for shareholder and distribution services and not the result of any
difference in amounts charged by the manager for core investment advisory
services. Accordingly, the core investment advisory expenses do not vary by
class. Different fees and expenses will affect performance. For additional
information concerning the other classes of
20 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
shares not offered by this Prospectus, call us at 1-800-345-3533 or contact a
sales representative or financial intermediary who offers those classes of
shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters that must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 21
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE:
1-800-345-8765
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 OR 816-444-3485
FAX: 816-340-7962
WWW.AMERICANCENTURY.COM
[american century logo(reg.sm)]
American
Century(reg.tm)
9806 [recycled logo]
SH-BKT-11996 Recycled
<PAGE>
PROSPECTUS
[american century logo(reg.sm)]
American
Century(reg.tm)
JULY 30, 1998
AMERICAN
CENTURY
GROUP
Small Cap Quantitative
ADVISOR CLASS
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century
Group Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Small Cap Quantitative
PROSPECTUS
JULY 30, 1998
Small Cap Quantitative
ADVISOR CLASS
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
American Century Quantitative Equity Funds is a part of American Century
Investments, a family of funds that includes nearly 70 no-load and low-load
mutual funds covering a variety of investment opportunities. One of the funds
from our American Century Group of funds is described in this Prospectus. Its
investment objective is listed on page 2 of this Prospectus. The other funds are
described in separate prospectuses.
The fund's shares offered in this Prospectus (the Advisor Class shares) are
sold at their net asset value with no sales charges or commissions. The Advisor
Class shares are subject to Rule 12b-1 shareholder services and distribution
fees as described in this Prospectus.
The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.
This Prospectus gives you information about the fund that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated July 30, 1998, 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 * P.O. Box 419385
Kansas City, Missouri 64141-6385 * 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 * In Missouri: 816-444-3038
www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY SMALL CAP QUANTITATIVE FUND
Small Cap Quantitative seeks long-term capital appreciation by investing
primarily in equity securities of small companies.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 INVESTMENT OBJECTIVE AMERICAN CENTURY INVESTMENTS
TABLE OF CONTENTS
Investment Objective of the Fund .......................................... 2
Transaction and Operating Expense Table ................................... 4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ........................................... 5
Risk Factors and Investment Techniques .................................... 5
Other Investment Practices, Their Characteristics
and Risks .............................................................. 6
Portfolio Turnover .................................................... 6
Convertible Securities ................................................ 6
Futures Contracts and Options Thereon ................................. 6
Short-Term Instruments ................................................ 6
Foreign Securities .................................................... 7
Other Techniques ...................................................... 7
Performance Advertising ................................................... 7
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
How to Purchase and Sell
American Century Funds ................................................. 9
How to Exchange from One American Century
Fund to Another ........................................................ 9
How to Redeem Shares ...................................................... 9
Telephone Services ........................................................ 9
Investors Line ........................................................ 9
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ............................................................... 10
When Share Price Is Determined ........................................ 10
How Share Price Is Determined ......................................... 10
Where to Find Information About Share Price ........................... 11
Distributions ............................................................. 11
Taxes ..................................................................... 12
Tax-Deferred Accounts ................................................. 12
Taxable Accounts ...................................................... 12
Management ................................................................ 13
Investment Management ................................................. 13
Code of Ethics ........................................................ 14
Transfer and Administrative Services .................................. 14
Year 2000 Issues ...................................................... 14
Distribution of Fund Shares ............................................... 15
Service and Distribution Fees ......................................... 15
Further Information About American Century ................................ 15
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
Small Cap
Quantitative
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases .......................... none
Maximum Sales Load Imposed on Reinvested Dividends ............... none
Deferred Sales Load .............................................. none
Redemption Fee ................................................... none
Exchange Fee ..................................................... none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees(1) ............................................... 0.65%
12b-1 Fees(2) .................................................... 0.50%
Other Expenses(3) ................................................ 0.01%
Total Fund Operating Expenses .................................... 1.16%
EXAMPLE
You would pay the following expenses 1 year $ 12
on a $1,000 investment, assuming a 3 years 37
5% annual return and redemption at 5 years 64
the end of each time period: 10 years 141
(1) A portion of the management fee may be paid by American Century Investment
Management, Inc. (the manager) to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed
by an affiliate of the manager. See "Management - Transfer and
Administrative Services," page 14.
(2) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the manager, and a portion is used to
compensate them for distribution and other shareholder services. See
"Service and Distribution Fees," page 15.
(3) Other Expenses include the fees and expenses of the fund's independent
directors, their legal counsel, interest and extraordinary expenses.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the fund offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by SEC
regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Advisor Class shares. The fund
offers two other classes of shares, one of which is primarily made available to
retail investors and one that is primarily made available to institutional
investors. The other classes have different fee structures than the Advisor
Class. The difference in the fee structures among the classes is the result of
their separate arrangements for shareholder and distribution services and not
the result of any difference in amounts charged by the manager for core
investment advisory services. Accordingly, the core investment advisory expenses
do not vary by class. A difference in fees will result in different performance
for the other classes. For additional information about the various classes, see
"Further Information About American Century," page 15.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
Small Cap Quantitative's investment objective is to seek long-term capital
appreciation by investing primarily in equity securities of small companies.
Small Cap Quantitative is designed for investors whose financial goals include
long-term capital growth.
The fund will invest primarily in common stocks of smaller companies, as
determined by market capitalization. A company shall be considered to have a
smaller market capitalization if, at the time of investment, it has a market
capitalization that is not greater than the market capitalization of the largest
company contained in the S&P Small Cap 600 Index. The S&P Small Cap 600 Index is
a stock index that tracks the performance of equity securities of smaller
capitalization companies. As of March 31, 1998, the largest company contained in
the S&P Small Cap 600 Index had a market capitalization of approximately $3.7
billion, while the median company contained in the index had a market
capitalization of approximately $554 million.
The manager seeks a total return for Small Cap Quantitative that exceeds the
total return of the S&P 600. Of course, Small Cap Quantitative's total return
may be higher or lower than the S&P 600's return over any period of time.
RISK FACTORS AND INVESTMENT TECHNIQUES
The manager uses quantitative management strategies in pursuit of the fund's
investment objective. Quantitative management combines two investment management
approaches. The first is to rank stocks based on their relative attractiveness.
The attractiveness of a stock is determined analytically by using a computer
model to combine value and growth measures. Examples of value measures include
price to book and price to cash flow ratios while examples of growth measures
include the rate of growth of a company's earnings and changes in analysts'
earnings estimates.
The second approach is to use a technique referred to as portfolio
optimization. Using a computer, the manager constructs a portfolio (i.e. company
names and shares held in each) that seeks the optimal tradeoff between the risk
of the portfolio relative to a benchmark (i.e. the S&P 600) and the expected
return of the portfolio as measured by the stock ranking model.
Approximately 65% of the fund's portfolio holdings will be drawn from equity
securities of companies with a market capitalization within the range of those
which make up the S&P 600. As of March 31, 1998, that capitalization range was
$31 million to $3.7 billion.
The fund's investment approach may cause it to be more heavily invested in
some industries than in others. However, the fund may not invest more than 25%
of its total assets in companies whose principal business activities are in the
same industry. In addition, the fund is a "diversified" investment company as
defined in the Investment Company Act of 1940 (the Investment Company Act). This
means that investments in any single issuer are limited by restrictions in the
Investment Company Act.
The fund may invest in securities or engage in transactions involving
instruments other than equity securities, as discussed in the section titled
"Other Investment Practices, Their Characteristics and Risks," page 6.
PROSPECTUS INFORMATION REGARDING THE FUND 5
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objective.
The manager considers the rate of portfolio turnover when it determines a change
is in order to achieve the objective and, accordingly, under normal conditions
the annual portfolio turnover rate is not anticipated to exceed 150%.
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 that the fund pays directly.
Higher portfolio turnover also may increase the likelihood that the capital
gains, if any, realized and distributed by the fund will include short-term
capital gains, which are taxable as ordinary income. When a security is sold,
the manager seeks whenever possible to minimize the capital gain that would be
realized.
CONVERTIBLE SECURITIES
Although the fund's equity investments consist primarily of common stock,
the fund may buy securities convertible into common stock, such as convertible
bonds, convertible preferred stocks, and warrants. The manager may purchase
these securities if it believes that a company's convertible securities are
undervalued in the market.
FUTURES CONTRACTS AND OPTIONS THEREON
The fund may buy or sell futures contracts relating to groups of securities
or indices and write or buy put and call options relating to such futures
contracts.
For options sold, the fund will segregate cash or appropriate liquid assets
including equity securities and debt securities of any grade equal to the value
of securities underlying the option unless the option is otherwise covered.
The fund will deposit cash or appropriate liquid assets in a segregated
custodial account in an amount equal to the fluctuating market value of long
futures contracts it has purchased, less any margin deposited on its long
position. It may hold cash or acquire such debt obligations for the purpose of
making these deposits.
The fund may use futures and options transactions to maintain cash reserves
while remaining fully invested, to facilitate trading, to reduce transaction
costs, or to pursue higher investment returns when a futures contract is priced
more attractively than its underlying security or index.
Futures contracts and options thereon may subject the fund to greater and
more volatile risks than might otherwise be the case. The principal risks
related to the use of such instruments are (1) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (2) possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need of additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.
The ordinary spreads between prices in the cash and futures markets, due to
the differences in the nature of those markets, are subject to distortion. Due
to the possibility of distortion, a correct forecast of factors, e.g. dividend
yields and short-term interest rates, by the manager may still not result in a
successful transaction. The manager may be incorrect in its expectations as to
the extent of various factor changes or the time span within which the changes
take place.
See the Statement of Additional Information for further information about
these instruments and their risks.
SHORT-TERM INSTRUMENTS
For liquidity purposes, the fund may invest in high-quality money market
instruments with remaining maturities of one year or less.
6 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
The fund also may enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers that are deemed to present
minimal credit risk. Credit risk determinations are made by the manager pursuant
to guidelines established by the Board of Directors. A repurchase agreement
involves the purchase of a security and a simultaneous agreement to sell the
security back to the seller at a higher price. Delays or losses could result if
the party to the agreement defaults or becomes bankrupt.
The fund may invest up to 5% of its total assets in any money market fund
including those advised by the manager, provided that the investment is
consistent with the fund's investment policies and restrictions.
FOREIGN SECURITIES
The fund may invest in securities of foreign issuers, including instruments
that trade on domestic or foreign securities exchanges in U.S. dollars or
foreign currencies. Securities of foreign issuers may be affected by the
strength of foreign currencies relative to the U.S. dollar or by political or
economic developments in foreign countries. Foreign companies may not be subject
to accounting standards or governmental regulations comparable to those that
affect U.S. companies, and there may be less public information about their
operations.
OTHER TECHNIQUES
The manager may buy other types of securities or employ other portfolio
management techniques on behalf of a fund, including reverse repurchase
agreements. When SEC guidelines require it to do so, the fund will set aside
cash or appropriate liquid assets in a segregated account to cover the fund's
obligations.
PERFORMANCE ADVERTISING
From time to time, the fund may advertise performance data. Fund performance
may be shown by presenting one or more performance measurements, including
cumulative total return or average annual total return, yield and effective
yield. Performance data may be quoted separately for the Advisor Class and for
the other classes.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period of time
expressed as a percentage of the fund's share price. The effective yield is
calculated in a similar manner, but when annualized, the income earned by the
investment is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect on the assumed
reinvestment.
Yield is calculated by adding over a 30-day (or one-month) period all
interest and dividend income (net of fund expenses) calculated on each day's
market values, dividing this sum by the average number of fund shares
outstanding during the period, and expressing the result as a percentage of the
fund's share price on the last day of the 30-day (or one-month) period. The
percentage is then annualized. Capital gains and losses are not included in the
calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on its shares or the income reported
in the fund's financial statements.
The fund also may include in advertisements data comparing its performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services, Inc.) and publications that monitor the performance
of mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, fund performance
may be compared to well-known indices of market performance. 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 fund performance or
historical or expected volatility or other fund characteristics, may be
presented numerically, graphically or in text.
PROSPECTUS INFORMATION REGARDING THE FUND 7
Fund performance also may be combined or blended with other funds in our fund
family, and that combined or blended performance may be compared to the same
indices to which individual funds may be compared.
All performance information advertised by the fund is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
The following sections explain how to purchase, exchange and redeem Advisor
Class shares of the funds offered by this Prospectus.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If you would like additional copies of financial reports and
prospectuses or separate mailing of account statements, please call us.
HOW TO PURCHASE AND SELL
AMERICAN CENTURY FUNDS
The fund offered by this Prospectus is available as an investment option
under your employer-sponsored retirement or savings plan or through or in
connection with a program, product or service offered by a financial
intermediary, such as a bank, broker-dealer or insurance company. Because all
records of your share ownership are maintained by your plan sponsor, plan
recordkeeper, or other financial intermediary, all orders to purchase, exchange
and redeem shares must be made through your employer or other financial
intermediary, as applicable.
If you are purchasing through a retirement or savings plan, the
administrator of your plan or your employee benefits office can provide you with
information on how to participate in your plan and how to select American
Century funds as an investment option.
If you are purchasing through a financial intermediary, you should contact
your service representative at the financial intermediary for information about
how to select American Century funds.
If you have questions about a fund, see "Investment Policies of the Fund,"
page 5, or call one of our Institutional Service Representatives at
1-800-345-3533.
Orders to purchase shares are effective on the day we receive payment. See
"When Share Price Is Determined," page 10.
We may discontinue offering shares generally in the fund (including any
class of shares of the fund) or in any particular state without notice to
shareholders.
HOW TO EXCHANGE FROM ONE AMERICAN CENTURY
FUND TO ANOTHER
Your plan or program may permit you to exchange your investment in the
shares of the fund for shares of another fund in our family. See your plan
administrator, employee benefits office or financial intermediary for details on
the rules in your plan governing exchanges.
HOW TO REDEEM SHARES
Subject to any restrictions imposed by your employer's plan or financial
intermediary's program, you can sell (redeem) your shares at their net asset
value through the plan or financial intermediary. Your plan administrator,
trustee, financial intermediary or other designated person must provide us with
redemption instructions. The shares will be redeemed at the net asset value next
computed after receipt of the instructions in good order. See "When Share Price
Is Determined," page 10. If you have any questions about how to redeem, contact
your plan administrator, employee benefits office, or service representative at
your financial intermediary, as applicable.
TELEPHONE SERVICES
INVESTORS LINE
To request information about our funds and a current prospectus, or get
answers to any questions that you may have about the funds and the services we
offer, call one of our Institutional Service Representatives at 1-800-345-3533.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 9
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares also is referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after our receipt of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents or designees before the time as of
which the net asset value of the fund is determined, are effective on, and will
receive the price determined, that day. Investment, redemption and exchange
requests received thereafter are effective on, and receive the price determined
as of, the close of the Exchange on the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the fund's transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the fund's procedures or any contractual arrangements with the
fund or the fund's distributor in order for you to receive that day's price.
We have contractual relationships with certain financial intermediaries in
which such intermediaries represent that they have systems to track the time at
which investment orders are received and to segregate orders received at
different times. Based on these representations, the fund has authorized such
intermediaries and their designees to accept purchase and redemption orders on
the fund's behalf up to the applicable cut-off time. The fund will be deemed to
have received such orders upon acceptance by the duly authorized intermediary,
and such orders will be priced at the fund's net asset value next determined
after acceptance on the fund's behalf by such intermediary.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges generally are valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair
10 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
value as determined in accordance with procedures adopted by the Board of
Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class of the fund are published in
leading newspapers daily. Because the total expense ratio for the Advisor Class
shares is 0.25% higher than the Investor Class, their net asset values will be
lower than the Investor Class. The net asset value of the Advisor Class of each
fund may be obtained by calling us.
DISTRIBUTIONS
Small Cap Quantitative's dividends are declared and paid quarterly in March,
June, September and December.
THE OBJECTIVE OF SMALL CAP QUANTITATIVE IS CAPITAL APPRECIATION AND NOT THE
PRODUCTION OF DISTRIBUTIONS. YOU ARE ENCOURAGED TO MEASURE THE SUCCESS OF YOUR
INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE
DISTRIBUTIONS YOU RECEIVE.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price Is Determined," page 10. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are
declared and paid twice a year, but the fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code, in all events in a manner consistent with the provisions of the
Investment Company Act.
Participants in employer-sponsored retirement or savings plans must reinvest
all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in certain IRAs and 403(b) plans paid
in cash only if you are at least 59 (1)/(2) years old or permanently and totally
disabled. Distribution checks normally are mailed within seven days after the
record date. Please consult our Investor Services Guide for further information
regarding your distribution options.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
fund expenses.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 11
Because such gains and dividends are included in the price of your shares,
when they are distributed the price of your shares is reduced by the amount of
the distribution. If you buy your shares through a taxable account just before
the distribution, you will pay the full price for your shares, and then receive
a portion of the purchase price back as a taxable distribution. See "Taxes,"
this page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income may
qualify for the 70% dividends received deduction for corporations to the extent
that the fund held shares receiving the dividend for more than 45 days.
Distributions from gains on assets held longer than 12 months but no more than
18 months (28% rate gain) and/or assets held longer than 18 months (20% rate
gain) are taxable as long-term gains regardless of the length of time you have
held the shares. However, you should note that any loss realized upon the sale
or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain (28% or 20% rate gain) to you with respect to such shares.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains (28% and/or 20% rate gain).
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions also may be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed. This charge is not refundable.
12 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders generally will recognize a gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and generally will be considered long-term, subject to
tax at a maximum rate of 28%, if shareholders have held such shares for a period
of more than 12 months but no more than 18 months and long-term, subject to tax
at a maximum rate of 20%, if shareholders have held such shares for a period of
more than 18 months. If a loss is realized on the redemption of fund shares, the
reinvestment in additional fund shares within 30 days before or after the
redemption may be subject to the "wash sale" rules of the Internal Revenue Code,
resulting in a postponement of the recognition of such loss for federal income
tax purposes.
In addition to the federal income tax consequences described above relating
to an investment in a fund, there may be other federal, state or local tax
considerations that depend upon the circumstances of each particular investor.
Prospective shareholders are therefore urged to consult their tax advisors with
respect to the effect of this investment on their own specific situations.
MANAGEMENT
INVESTMENT MANAGEMENT
The fund is a diversified, open-end series of American Century Quantitative
Equity Funds (the company). Under the laws of the State of California, the Board
of Directors is responsible for managing the business and affairs of the
company. 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 clients 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 it deems appropriate in pursuit of the fund's investment
objective. Individual portfolio manager members of the team also may adjust
portfolio holdings of the fund or of sectors of the fund as necessary between
team meetings. John Schniedwind, Senior Vice President and Group
Leader--Quantitative Equity, supervises the team that manages the fund.
The portfolio manager members of the team managing the fund and their work
experience for the last five years are as follows:
KURT BORGWARDT, Vice President, Portfolio Manager and Director of
Quantitative Equity Research, joined American Century in 1990, and has managed
the quantitative equity research effort since then.
WILLIAM MARTIN, Vice President and Portfolio Manager, joined American
Century in 1989.
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 funds, the manager receives a monthly fee
based on a percentage of the average net assets of each fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process: First, a
fee rate schedule is applied to the assets of all of the funds in a fund's
investment category that are managed by the manager (the Investment Category
Fee). The three investment categories are: Money Market Funds, Bond Funds and
Equity Funds. Second, a separate fee rate schedule is applied to the assets of
all of the funds managed by the manager (the Complex Fee). The Investment
Category Fee and the Complex Fee are then added to determine the unified
management fee payable by the fund to the manager. Currently, the Investment
Category Fee for the fund is an annual rate of 0.60% of the average net assets
of the fund. The Complex
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 13
Fee is currently an annual rate of 0.05% of the average net assets of the fund.
Further information about the calculation of the annual management fee is
contained in the Statement of Additional Information.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the fund by
the aggregate average daily closing value of the fund's net assets during the
previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolio
obtain preclearance before executing personal trades. 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, American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111, acts as transfer agent and dividend-paying
agent for the fund. It provides facilities, equipment and personnel to the fund,
and is paid for such services by the manager.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager
or its affiliates.
The manager and the transfer agent are both wholly owned by American Century
Companies, Inc. (ACC). James E. Stowers Jr., Chairman of the Board of Directors
of ACC, controls ACC by virtue of his ownership of a majority of its common
stock.
Pursuant to a Sub-Administration Agreement with the manager, Funds
Distributor Inc. (FDI) serves as the co-administrator for the fund. FDI is
responsible for (i) providing certain officers of the fund and (ii) reviewing
and filing marketing and sales literature on behalf of the fund. The fees and
expenses of FDI are paid by the manager.
YEAR 2000 ISSUES
Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. The
fund and the manager depend upon the computer systems of various service
providers, including the transfer agent, for their day-to-day operations.
Inadequate remediation of the Year 2000 problem by these service providers and
others with whom they interact could have an adverse effect on the fund's
operations, including pricing, securities trading and settlement, and the
provision of shareholder services.
The transfer agent, in cooperation with the manager, has assembled a team of
information technology professionals who are taking steps to address Year 2000
issues with respect to its own computers and to obtain satisfactory assurances
that comparable steps are being taken by the fund's and the manager's other
major service providers and vendors. The key phases of the remediation plan
include: an inventory of all internal systems, vendor products and services and
data providers (substantially completed in 1997); an assessment of all systems
for date reliance and the impact of the century rollover on each (substantially
completed with respect to critical systems in early 1998); and the renovation
and testing of affected systems (targeted for completion with respect to
critical systems by the end of 1998). The manager will pay for the remediation
effort with revenues from its management fee, so that the fund will not directly
bear any of the cost.
14 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
In light of these remediation efforts, the fund does not anticipate a
material adverse impact on its business or operations. However, there can be no
assurance that the remediation plan will be sufficient and timely or that
interaction with other noncomplying computer systems will not have a material
adverse effect on the fund's business, operations or financial condition.
In addition, the issuers of the securities in which the fund invests may
have Year 2000 computer problems. Although the media and various regulatory
agencies have focused a great deal of attention on the need for issuers to
assess and remediate these problems, their failure to do so could hurt the
fund's performance.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by FDI, a registered broker-dealer. FDI is
a wholly owned indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109. As agent for the fund and the manager, the distributor enters into
contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries with respect to the sale of the fund's shares and/or
the use of the fund's shares in various financial services. The manager (or an
affiliate) pays all expenses incurred in promoting sales of, and distributing,
the Advisor Class and in securing such services out of the Rule 12b-1 fees
described in the section that follows.
Investors may open accounts with American Century only through the
distributor. All purchase transactions in the fund are processed by the transfer
agent, which is authorized to accept any instructions relating to fund accounts.
All purchase orders must be accepted by the distributor. All fees and expenses
of FDI in acting as distributor for the fund are paid by the manager.
SERVICE AND DISTRIBUTION FEES
Rule 12b-1 adopted by the SEC under the Investment Company Act permits
investment companies that adopt a written plan to pay certain expenses
associated with the distribution of their shares. Pursuant to that rule, the
fund's Board of Directors and the initial shareholder of the fund's Advisor
Class shares have approved and entered into a Master Distribution and
Shareholder Services Plan (the Plan) with the distributor. Pursuant to the Plan,
the fund pays a shareholder services fee and a distribution fee, each equal to
0.25% (for a total of 0.50%) per annum of the average daily net assets of the
shares of the fund's Advisor Class. The shareholder services fee is paid for the
purpose of paying the costs of securing certain shareholder and administrative
services, and the distribution fee is paid for the purpose of paying the costs
of providing various distribution services. All or a portion of such fees are
paid by the manager, as paying agent for the fund, to the banks, broker-dealers,
insurance companies or other financial intermediaries through which such shares
are made available.
The Plan has been adopted and will be administered in accordance with the
requirements of Rule 12b-1 under the Investment Company Act. For additional
information about the Plan and its terms, see "Multiple Class Structure - Master
Distribution and Shareholder Services Plan" in the Statement of Additional
Information. Fees paid pursuant to the Plan may be paid for shareholder services
and the maintenance of accounts and therefore may constitute "service fees" for
purposes of applicable rules of the National Association of Securities Dealers.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Quantitative Equity Funds is an 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 at 1-800-345-3533 (international
calls: 816-531-5575).
American Century Quantitative Equity Funds issues shares with no par value.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian and in effect each series
is a separate fund.
American Century offers three classes of each of the funds offered by this
Prospectus: an Investor Class, an Institutional Class and an Advisor Class.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 15
The shares offered by this Prospectus are Advisor Class shares.
The Investor Class is primarily made available to retail investors. The
Institutional Class is primarily offered to institutional investors or through
institutional distribution channels, such as employer-sponsored retirement plans
or through banks, broker-dealers, insurance companies or other financial
intermediaries. The other classes have different fees, expenses, and/or minimum
investment requirements than the Advisor Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
Different fees and expenses will affect performance. For additional information
concerning the other classes of shares not offered by this Prospectus, call us
at 1-800-345-3533 or contact a sales representative or financial intermediary
who offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters that must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
16 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
NOTES
PROSPECTUS NOTES 17
P.O. BOX 419385
KANSAS CITY, MISSOURI
64141-6385
INSTITUTIONAL SERVICES:
1-800-345-3533 OR 816-531-5575
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-345-1833 OR 816-444-3038
FAX: 816-340-4655
WWW.AMERICANCENTURY.COM
[american century logo(reg.sm)]
American
Century(reg.tm)
9806 [recycled logo]
SH-BKT-11997 Recycled
<PAGE>
PROSPECTUS
[american century logo(reg.sm)]
American
Century(reg.tm)
JULY 30, 1998
AMERICAN
CENTURY
GROUP
Small Cap Quantitative
INSTITUTIONAL CLASS
AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS
American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your investment needs, American Century
funds have been divided into three groups based on investment style and
objectives. These groups, which appear below, are designed to help simplify your
fund decisions.
AMERICAN CENTURY INVESTMENTS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century
Group Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Small Cap Quantitative
PROSPECTUS
JULY 30, 1998
Small Cap Quantitative
INSTITUTIONAL CLASS
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
American Century Quantitative Equity Funds is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. One of the funds from our
American Century Group of funds is described in this Prospectus. Its investment
objective is listed on page 2 of this Prospectus. The other funds are described
in separate prospectuses.
The fund's shares offered in this Prospectus (the Institutional Class
shares) are sold at their net asset value with no sales charges or commissions.
The Institutional Class shares are made available for purchase by large
institutional shareholders, such as bank trust departments, corporations,
endowments, foundations and financial advisors that meet the fund's minimum
investment requirements. Institutional Class shares are not available for
purchase by insurance companies or participant-directed employer-sponsored
retirement plans.
This Prospectus gives you information about the 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 July 30, 1998, 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 * P.O. Box 419385
Kansas City, Missouri 64141-6385 * 1-800-345-3533
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-345-1833 * In Missouri: 816-444-3038
www.americancentury.com
Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS 1
INVESTMENT OBJECTIVE OF THE FUND
AMERICAN CENTURY SMALL CAP QUANTITATIVE FUND
Small Cap Quantitative seeks long-term capital appreciation by investing
primarily in equity securities of small companies.
There is no assurance that the fund will achieve its investment objective.
NO PERSON IS AUTHORIZED BY THE FUND TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUND, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.
2 INVESTMENT OBJECTIVE AMERICAN CENTURY INVESTMENTS
TABLE OF CONTENTS
Investment Objective of the Fund .......................................... 2
Transaction and Operating Expense Table ................................... 4
INFORMATION REGARDING THE FUND
Investment Policies of the Fund ........................................... 5
Risk Factors and Investment Techniques .................................... 5
Other Investment Practices, Their Characteristics
and Risks .............................................................. 6
Portfolio Turnover .................................................... 6
Convertible Securities ................................................ 6
Futures Contracts and Options Thereon ................................. 6
Short-Term Instruments ................................................ 6
Foreign Securities .................................................... 7
Other Techniques ...................................................... 7
Performance Advertising ................................................... 7
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
American Century Investments .............................................. 9
Investing in American Century ............................................. 9
How to Open an Account .................................................... 9
By Mail .......................................................... 9
By Wire .......................................................... 9
By Exchange ...................................................... 9
In Person ........................................................ 10
Subsequent Investments ................................................ 10
By Mail .......................................................... 10
By Telephone ..................................................... 10
By Wire .......................................................... 10
In Person ........................................................ 10
Automatic Investment Plan ............................................. 10
Minimum Investment ........................................................ 10
How to Exchange from One Account to Another ............................... 10
By Mail .......................................................... 11
By Telephone ..................................................... 11
How to Redeem Shares ...................................................... 11
By Mail .......................................................... 11
By Telephone ..................................................... 11
By Check-A-Month ................................................. 11
Other Automatic Redemptions ...................................... 11
Redemption Proceeds ................................................... 11
By Check ......................................................... 11
By Wire and ACH .................................................. 11
Signature Guarantee ....................................................... 11
Special Shareholder Services .............................................. 12
Open Order Service ............................................... 12
Tax-Qualified Retirement Plans ................................... 12
Important Policies Regarding Your Investments ............................. 12
Reports to Shareholders ................................................... 13
Customers of Banks, Broker-Dealers and Other
Financial Intermediaries ............................................... 14
ADDITIONAL INFORMATION YOU SHOULD KNOW
Share Price ............................................................... 15
When Share Price Is Determined ........................................ 15
How Share Price Is Determined ......................................... 15
Where to Find Information About Share Price ........................... 16
Distributions ............................................................. 16
Taxes ..................................................................... 17
Tax-Deferred Accounts ................................................. 17
Taxable Accounts ...................................................... 17
Management ................................................................ 18
Investment Management ................................................. 18
Code of Ethics ........................................................ 19
Transfer and Administrative Services .................................. 19
Year 2000 Issues ...................................................... 19
Distribution of Fund Shares ............................................... 20
Further Information About American Century ................................ 20
PROSPECTUS TABLE OF CONTENTS 3
TRANSACTION AND OPERATING EXPENSE TABLE
Small Cap
Quantitative
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases ............................ none
Maximum Sales Load Imposed on Reinvested Dividends ................. none
Deferred Sales Load ................................................ none
Redemption Fee ..................................................... none
Exchange Fee ....................................................... none
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fees(1) .................................................0.70%
12b-1 Fees ......................................................... none
Other Expenses(2) ..................................................0.01%
Total Fund Operating Expenses ......................................0.71%
EXAMPLE
You would pay the following expenses 1 year $ 7
on a $1,000 investment, assuming a 3 years 23
5% annual return and redemption at 5 years 40
the end of each time period: 10 years 88
(1) A portion of the management fee may be paid by American Century Investment
Management, Inc. (the manager) to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed
by an affiliate of the manager. See "Management - Transfer and
Administrative Services," page 19.
(2) Other Expenses include the fees and expenses of the fund's independent
directors, their legal counsel, interest and extraordinary expenses.
The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the class of shares of the fund offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by SEC
regulations.
NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The shares offered by this Prospectus are Institutional Class shares. The
fund offers two other classes of shares, one of which is primarily made
available to retail investors and one that is primarily made available to
financial intermediaries. The other classes have different fee structures than
the Institutional Class. The difference in the fee structures among the classes
is the result of their separate arrangements for shareholder and distribution
services and not the result of any difference in amounts charged by the manager
for core investment advisory services. Accordingly, the core investment advisory
expenses do not vary by class. A difference in fees will result in different
performance for the other class. For additional information about the various
classes, see "Further Information About American Century," page 20.
4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS
INFORMATION REGARDING THE FUND
INVESTMENT POLICIES OF THE FUND
The fund has adopted certain investment restrictions that are set forth in
the Statement of Additional Information. Those restrictions, as well as the
investment objective of the fund identified on page 2 of this Prospectus, and
any other investment policies designated as "fundamental" in this Prospectus or
in the Statement of Additional Information, cannot be changed without
shareholder approval. The fund has implemented additional investment policies
and practices to guide its activities in the pursuit of its investment
objective. These policies and practices, which are described throughout this
Prospectus, are not designated as fundamental policies and may be changed
without shareholder approval.
Small Cap Quantitative's investment objective is to seek long-term capital
appreciation by investing primarily in equity securities of small companies.
Small Cap Quantitative is designed for investors whose financial goals include
long-term capital growth.
The fund will invest primarily in common stocks of smaller companies, as
determined by market capitalization. A company shall be considered to have a
smaller market capitalization if, at the time of investment, it has a market
capitalization that is not greater than the market capitalization of the largest
company contained in the S&P Small Cap 600 Index. The S&P Small Cap 600 Index is
a stock index that tracks the performance of equity securities of smaller
capitalization companies. As of March 31, 1998, the largest company contained in
the S&P Small Cap 600 Index had a market capitalization of approximately $3.7
billion, while the median company contained in the index had a market
capitalization of approximately $554 million.
The manager seeks a total return for Small Cap Quantitative that exceeds the
total return of the S&P 600. Of course, Small Cap Quantitative's total return
may be higher or lower than the S&P 600's return over any period of time.
RISK FACTORS AND INVESTMENT TECHNIQUES
The manager uses quantitative management strategies in pursuit of the fund's
investment objective. Quantitative management combines two investment management
approaches. The first is to rank stocks based on their relative attractiveness.
The attractiveness of a stock is determined analytically by using a computer
model to combine value and growth measures. Examples of value measures include
price to book and price to cash flow ratios while examples of growth measures
include the rate of growth of a company's earnings and changes in analysts'
earnings estimates.
The second approach is to use a technique referred to as portfolio
optimization. Using a computer, the manager constructs a portfolio (i.e. company
names and shares held in each) that seeks the optimal tradeoff between the risk
of the portfolio relative to a benchmark (i.e. the S&P 600) and the expected
return of the portfolio as measured by the stock ranking model.
Approximately 65% of the fund's portfolio holdings will be drawn from equity
securities of companies with a market capitalization within the range of those
which make up the S&P 600. As of March 31, 1998, that capitalization range was
$31 million to $3.7 billion.
The fund's investment approach may cause it to be more heavily invested in
some industries than in others. However, the fund may not invest more than 25%
of its total assets in companies whose principal business activities are in the
same industry. In addition, the fund is a "diversified" investment company as
defined in the Investment Company Act of 1940 (the Investment Company Act). This
means that investments in any single issuer are limited by restrictions in the
Investment Company Act.
The fund may invest in securities or engage in transactions involving
instruments other than equity securities, as discussed in the section titled
"Other Investment Practices, Their Characteristics and Risks," page 6.
PROSPECTUS INFORMATION REGARDING THE FUND 5
OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS
For additional information, see "Investment Restrictions" in the Statement
of Additional Information.
PORTFOLIO TURNOVER
Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to the fund's objective.
The manager considers the rate of portfolio turnover when it determines a change
is in order to achieve the objective and, accordingly, under normal conditions
the annual portfolio turnover rate is not anticipated to exceed 150%.
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 that the fund pays directly.
Higher portfolio turnover also may increase the likelihood that the capital
gains, if any, realized and distributed by the fund will include short-term
capital gains, which are taxable as ordinary income. When a security is sold,
the manager seeks whenever possible to minimize the capital gain that would be
realized.
CONVERTIBLE SECURITIES
Although the fund's equity investments consist primarily of common stock,
the fund may buy securities convertible into common stock, such as convertible
bonds, convertible preferred stocks, and warrants. The manager may purchase
these securities if it believes that a company's convertible securities are
undervalued in the market.
FUTURES CONTRACTS AND OPTIONS THEREON
The fund may buy or sell futures contracts relating to groups of securities
or indices and write or buy put and call options relating to such futures
contracts.
For options sold, the fund will segregate cash or appropriate liquid assets
including equity securities and debt securities of any grade equal to the value
of securities underlying the option unless the option is otherwise covered.
The fund will deposit cash or appropriate liquid assets in a segregated
custodial account in an amount equal to the fluctuating market value of long
futures contracts it has purchased, less any margin deposited on its long
position. It may hold cash or acquire such debt obligations for the purpose of
making these deposits.
The fund may use futures and options transactions to maintain cash reserves
while remaining fully invested, to facilitate trading, to reduce transaction
costs, or to pursue higher investment returns when a futures contract is priced
more attractively than its underlying security or index.
Futures contracts and options thereon may subject the fund to greater and
more volatile risks than might otherwise be the case. The principal risks
related to the use of such instruments are (1) the offsetting correlation
between movements in the market price of the portfolio investments (held or
intended) being hedged and in the price of the futures contract or option may be
imperfect; (2) possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need of additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.
The ordinary spreads between prices in the cash and futures markets, due to
the differences in the nature of those markets, are subject to distortion. Due
to the possibility of distortion, a correct forecast of factors, e.g. dividend
yields and short-term interest rates, by the manager may still not result in a
successful transaction. The manager may be incorrect in its expectations as to
the extent of various factor changes or the time span within which the changes
take place.
See the Statement of Additional Information for further information about
these instruments and their risks.
SHORT-TERM INSTRUMENTS
For liquidity purposes, the fund may invest in high-quality money market
instruments with remaining maturities of one year or less.
6 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
The fund also may enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers that are deemed to present
minimal credit risk. Credit risk determinations are made by the manager pursuant
to guidelines established by the Board of Directors. A repurchase agreement
involves the purchase of a security and a simultaneous agreement to sell the
security back to the seller at a higher price. Delays or losses could result if
the party to the agreement defaults or becomes bankrupt.
The fund may invest up to 5% of its total assets in any money market fund
including those advised by the manager, provided that the investment is
consistent with the fund's investment policies and restrictions.
FOREIGN SECURITIES
The fund may invest in securities of foreign issuers, including instruments
that trade on domestic or foreign securities exchanges in U.S. dollars or
foreign currencies. Securities of foreign issuers may be affected by the
strength of foreign currencies relative to the U.S. dollar or by political or
economic developments in foreign countries. Foreign companies may not be subject
to accounting standards or governmental regulations comparable to those that
affect U.S. companies, and there may be less public information about their
operations.
OTHER TECHNIQUES
The manager may buy other types of securities or employ other portfolio
management techniques on behalf of a fund, including reverse repurchase
agreements. When SEC guidelines require it to do so, the fund will set aside
cash or appropriate liquid assets in a segregated account to cover the fund's
obligations.
PERFORMANCE ADVERTISING
From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield and
effective yield. Performance data may be quoted separately for the Investor
Class and for the other classes.
Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.
A quotation of yield reflects a fund's income over a stated period of time
expressed as a percentage of the fund's share price. The effective yield is
calculated in a similar manner, but when annualized, the income earned by the
investment is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect on the assumed
reinvestment.
Yield is calculated by adding over a 30-day (or one-month) period all
interest and dividend income (net of fund expenses) calculated on each day's
market values, dividing this sum by the average number of fund shares
outstanding during the period, and expressing the result as a percentage of the
fund's share price on the last day of the 30-day (or one-month) period. The
percentage is then annualized. Capital gains and losses are not included in the
calculation.
Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on its shares or the income reported
in the fund's financial statements.
The fund also may include in advertisements data comparing its performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services, Inc.) and publications that monitor the performance
of mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, fund performance
may be compared to well-known indices of market performance. 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 fund performance or
historical or expected volatility or other fund characteristics, may be
presented numerically, graphically or in text.
PROSPECTUS INFORMATION REGARDING THE FUND 7
Fund performance also may be combined or blended with other funds in our fund
family, and that combined or blended performance may be compared to the same
indices to which individual funds may be compared.
All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of fund
shares when redeemed may be more or less than their original cost.
8 INFORMATION REGARDING THE FUND AMERICAN CENTURY INVESTMENTS
HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS
AMERICAN CENTURY INVESTMENTS
Small Cap Quantitative is a part of the American Century Investments family
of mutual funds. Our family provides a full range of investment opportunities,
from the aggressive equity growth funds in our Twentieth Century Group, to the
fixed income funds in our Benham Group, to the moderate risk and specialty funds
in our American Century Group. Please call 1-800-345-3533 for a brochure or
prospectuses for the other funds in the American Century Investments family.
To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If you would like additional copies of financial reports and
prospectuses or separate mailing of account statements, please call us.
INVESTING IN AMERICAN CENTURY
The following sections explain how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.
If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Minimum Investment," page 10 and "Customers of Banks, Broker-Dealers and Other
Financial Intermediaries," page 14.
HOW TO OPEN AN ACCOUNT
To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You also must certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.
You may invest in the following ways:
BY MAIL
Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.
BY WIRE
* RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)
* BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111
* BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918
* REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.
* ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.
* BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):
* Taxpayer identification or Social Security
number.
* If more than one account, account numbers and amount to be invested in
each account.
* Current tax year, previous tax year or rollover designation if an IRA.
Specify whether traditional IRA, Roth IRA, Education IRA, SEP-IRA,
SARSEP-IRA, SIMPLE Employer or SIMPLE Employee.
BY EXCHANGE
Call 1-800-345-3533 from 7 a.m. to 7 p.m. Central time to get information on
opening an account by exchanging from another American Century account. See page
10 for more information on exchanges.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 9
IN PERSON
If you prefer to work with a representative in person, please visit one of
our Investor Centers, located at:
4500 Main Street
Kansas City, Missouri 64111
4917 Town Center Drive
Leawood, Kansas 66211
1665 Charleston Road
Mountain View, California 94043
2000 S. Colorado Blvd.
Denver, Colorado 80222
SUBSEQUENT INVESTMENTS
Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments is $250 for checks submitted without the investment slip portion of
a previous statement or confirmation and $50 for all other types of subsequent
investments.
BY MAIL
When making subsequent investments, enclose your check with the investment
slip portion of a previous statement or confirmation. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)
BY TELEPHONE
Upon completion of your application and once your account is open, you may
make investments by telephone. You may call an Investor Services Representative
or use our Automated Information Line.
BY WIRE
You may make subsequent investments by wire. Follow the wire transfer
instructions on pages 9-10 and indicate your account number.
IN PERSON
You may make subsequent investments in person at one of our Investor
Centers. The locations of our Investor Centers are listed on this page.
AUTOMATIC INVESTMENT PLAN
By completing the application and electing to make investments automatically
we will draw on your bank account regularly. Such investments must be at least
the equivalent of $50 per month. You also may choose an automatic payroll or
government direct deposit. If you are establishing a new account, check the
appropriate box under "Automatic Investments" on your application to receive
more information. If you would like to add a direct deposit to an existing
account, please call an Institutional Service Representative.
MINIMUM INVESTMENT
The minimum investment is $5 million ($3 million for endowments and
foundations). If you invest with us through a bank, broker-dealer or other
financial intermediary, the minimum investment requirement may be met by
aggregating the investments of various clients of your financial intermediary.
The minimum investment requirement may be waived if you or your financial
intermediary, if applicable, has an aggregate investment in our family of funds
of $10 million or more ($5 million for endowments and foundations). If your
balance or the balance of your financial intermediary, if applicable, falls
below the minimum investment requirements due to redemptions or exchanges, we
reserve the right to convert your shares to Investor Class shares of the same
fund. The Investor Class shares have a unified management fee that is 0.20%
higher than the Institutional Class shares.
HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER
As long as you meet any minimum investment requirements, you may exchange
your fund shares to our other funds up to six times per year per account. An
exchange request will be processed as of the same day it is received, if it is
received before the fund's net asset values are calculated, which is one hour
prior to the close of the New York Stock Exchange for funds issued by American
Century Target Maturities Trust and at the close of the Exchange for all of our
other
10 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
funds. See "When Share Price Is Determined," page 15.
For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.
BY MAIL
You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.
BY TELEPHONE
You can make exchanges over the telephone upon completion and receipt of
your application or by calling us at 1-800-345-3533 to get the appropriate form.
HOW TO REDEEM SHARES
We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.
Please note that a request to redeem shares in an IRA or 403(b) plan must be
accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.
BY MAIL
Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," this page.
BY TELEPHONE
Upon completion of your application and once your account is open, you may
redeem your shares by calling an Institutional Service Representative.
BY CHECK-A-MONTH
You may redeem shares by Check-A-Month. A Check-A-Month plan automatically
redeems enough shares each month to provide you with a check in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.
OTHER AUTOMATIC REDEMPTIONS
You may elect to make redemptions automatically by authorizing us to send
funds to you or to your account at a bank or other financial institution. To set
up automatic redemptions, call an Institutional Service Representative.
REDEMPTION PROCEEDS
Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.
Redemption proceeds may be sent to you in one of the following ways:
BY CHECK
Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.
BY WIRE AND ACH
You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.
Your bank usually will receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Once the funds are transmitted, the time of receipt and the funds' availability
are not under our control.
SIGNATURE GUARANTEE
To protect your accounts from fraud, some transactions will require a
signature guarantee. You can obtain a signature guarantee from a bank or trust
company, credit union, broker-dealer, securities exchange or association,
clearing agency or savings association, as defined by federal law.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 11
For a more in-depth explanation of our signature guarantee policy, or if you
live outside the United States and would like to know how to obtain a signature
guarantee, please consult our Investor Services Guide.
We reserve the right to require a signature guarantee on any transaction, or
to change this policy at any time.
SPECIAL SHAREHOLDER SERVICES
We offer several services to make your account easier to manage. These are
listed on the account application. You will find more information about each of
these services in our Investor Services Guide.
Our special shareholder services include:
OPEN ORDER SERVICE
Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.
If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.
Because of their time-sensitive nature, open order transactions are accepted
only by telephone or in person. These transactions are subject to exchange
limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.
TAX-QUALIFIED RETIREMENT PLANS
The fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:
* Individual Retirement Accounts (IRAs);
* 403(b)plans for employees of public school
systems and non-profit organizations; or
* Profit sharing plans and pension plans for
corporations and other employers.
If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.
You also can transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.
IMPORTANT POLICIES REGARDING YOUR INVESTMENTS
Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.
(1) We reserve the right for any reason to suspend the offering of shares
for a period of time, or to reject any specific purchase order
(including purchases by exchange). Additionally, purchases may be
refused if, in the opinion of the manager, they are of a size that
would disrupt the management of the fund.
(2) We reserve the right to make changes to any stated investment
requirements, including those that relate to purchases, transfers and
redemptions. In addition, we also may alter, add to or terminate any
investor services and privileges. Any changes may affect all
shareholders or only certain series or classes of shareholders.
(3) Shares being acquired must be qualified for sale in your state of
residence.
(4) Transactions requesting a specific price and date, other than open
orders, will be refused. Once you have mailed or otherwise transmitted
your transaction instructions to us, they may not be modified or
canceled.
12 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require
evidence satisfactory to us of the authority of the individual making
the request.
(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These
procedures are designed to protect shareholders from unauthorized or
fraudulent instructions. If we do not employ reasonable procedures to
confirm the genuineness of instructions, then we may be liable for
losses due to unauthorized or fraudulent instructions. The company, its
transfer agent and manager will not be responsible for any loss due to
instructions they reasonably believe are genuine.
(7) All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as Mary
Elizabeth Jones, she should sign that way and not as Mary E. Jones.
(8) Unusual stock market conditions have in the past resulted in an
increase in the number of shareholder telephone calls. If you
experience difficulty in reaching us during such periods, you may send
your transaction instructions by mail, express mail or courier service,
or you may visit one of our Investor Centers. You also may use our
Automated Information Line if you have requested and received an access
code and are not attempting to redeem shares.
(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.
(10) We will perform special inquiries on shareholder accounts. A research
fee of $15 per hour may be applied.
REPORTS TO SHAREHOLDERS
At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.
With the exception of most automatic transactions, each time you invest,
redeem, transfer or exchange shares, we will send you a confirmation of the
transaction. See the Investor Services Guide for more detail.
Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.
No later than January 31 of each year, we will send you reports that you may
use in completing your U.S. income tax return. See the Investor Services Guide
for more information.
Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.
PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 13
CUSTOMERS OF BANKS, BROKER-DEALERS AND OTHER
FINANCIAL INTERMEDIARIES
Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through a
bank, broker-dealer or other financial intermediary.
If you own or are considering purchasing fund shares through a bank,
broker-dealer, or other financial intermediary, your ability to purchase,
exchange and redeem shares will depend on your agreement with, and the policies
of, such financial intermediary.
You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your financial intermediary.
14 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS
ADDITIONAL INFORMATION YOU SHOULD KNOW
SHARE PRICE
WHEN SHARE PRICE IS DETERMINED
The price of your shares also is referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds, except funds issued by American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. The net asset values for Target Maturities funds are
determined one hour prior to the close of the Exchange.
Investments and requests to redeem or exchange shares will receive the share
price next determined after our receipt of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents or designees before the time as of
which the net asset value of the fund is determined, are effective on, and will
receive the price determined, that day. Investment, redemption and exchange
requests received thereafter are effective on, and receive the price determined
as of, the close of the Exchange on the next day the Exchange is open.
Investments are considered received only when payment is received by us.
Wired funds are considered received on the day they are deposited in our bank
account if they are deposited before the time as of which the net asset value of
the fund is determined.
Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.
Investment and transaction instructions received by us on any business day
by mail prior to the time as of which the net asset value of the fund is
determined will receive that day's price. Investments and instructions received
after that time will receive the price determined on the next business day.
If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the fund's transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the fund's procedures or any contractual arrangements with the
fund or the fund's distributor in order for you to receive that day's price.
We have contractual relationships with certain financial intermediaries in
which such intermediaries represent that they have systems to track the time at
which investment orders are received and to segregate orders received at
different times. Based on these representations, the fund has authorized such
intermediaries and their designees to accept purchase and redemption orders on
the fund's behalf up to the applicable cut-off time. The fund will be deemed to
have received such orders upon acceptance by the duly authorized intermediary,
and such orders will be priced at the fund's net asset value next determined
after acceptance on the fund's behalf by such intermediary.
HOW SHARE PRICE IS DETERMINED
The valuation of assets for determining net asset value may be summarized as
follows:
The portfolio securities of the fund, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges generally are valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 15
value as determined in accordance with procedures adopted by the Board of
Directors.
Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.
The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then exchanged to dollars at the prevailing foreign
exchange rate.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined that was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.
Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the New York Stock
Exchange is not open and on which a fund's net asset value is not calculated.
Therefore, such calculation does not take place contemporaneously with the
determination of the prices of many of the portfolio securities used in such
calculation and the value of a fund's portfolio may be affected on days when
shares of the fund may not be purchased or redeemed.
WHERE TO FIND INFORMATION ABOUT SHARE PRICE
The net asset values of the Investor Class are published in leading
newspapers daily. The net asset value of the Institutional Class of each fund
may be obtained by calling us.
DISTRIBUTIONS
Small Cap Quantitative's dividends are declared and paid quarterly in March,
June, September and December.
THE OBJECTIVE OF SMALL CAP QUANTITATIVE IS CAPITAL APPRECIATION AND NOT THE
PRODUCTION OF DISTRIBUTIONS. YOU ARE ENCOURAGED TO MEASURE THE SUCCESS OF YOUR
INVESTMENT BY THE VALUE OF YOUR INVESTMENT AT ANY GIVEN TIME AND NOT BY THE
DISTRIBUTIONS YOU RECEIVE.
You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price Is Determined," page 15. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed, the distribution on the redeemed shares
will be included with your redemption proceeds.
Distributions from net realized securities gains, if any, generally are
declared and paid twice a year, but the fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code, in all events in a manner consistent with the provisions of the
Investment Company Act.
Participants in employer-sponsored retirement or savings plans must reinvest
all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in certain IRAs and 403(b) plans paid
in cash only if you are at least 59 (1)/(2) years old or permanently and totally
disabled. Distribution checks normally are mailed within seven days after the
record date. Please consult our Investor Services Guide for further information
regarding your distribution options.
A distribution on shares of a fund does not increase the value of your
shares or your total return. At any given time the value of your shares includes
the undistributed net gains, if any, realized by the fund on the sale of
portfolio securities, and undistributed dividends and interest received, less
fund expenses.
16 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
Because such gains and dividends are included in the price of your shares,
when they are distributed the price of your shares is reduced by the amount of
the distribution. If you buy your shares through a taxable account just before
the distribution, you will pay the full price for your shares, and then receive
a portion of the purchase price back as a taxable distribution. See "Taxes,"
this page.
TAXES
The fund has elected to be taxed under Subchapter M of the Internal Revenue
Code, which means that to the extent its income is distributed to shareholders,
it pays no income tax.
TAX-DEFERRED ACCOUNTS
If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.
Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.
TAXABLE ACCOUNTS
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income may
qualify for the 70% dividends received deduction for corporations to the extent
that the fund held shares receiving the dividend for more than 45 days.
Distributions from gains on assets held longer than 12 months but no more than
18 months (28% rate gain) and/or assets held longer than 18 months (20% rate
gain) are taxable as long-term gains regardless of the length of time you have
held the shares. However, you should note that any loss realized upon the sale
or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain (28% or 20% rate gain) to you with respect to such shares.
Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) will not have increased. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
investment portfolio of the fund. If these portfolio securities are subsequently
sold and the gains are realized, they will, to the extent not offset by capital
losses, be paid to you as a distribution of capital gains and will be taxable to
you as short-term or long-term capital gains (28% and/or 20% rate gain).
In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.
Distributions also may be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). Those regulations require you to certify that
the Social Security number or tax identification number you provide is correct
and that you are not subject to 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
tax identification number will subject us to a penalty of $50, which will be
charged against your account if you fail to provide the certification by the
time the report is filed. This charge is not refundable.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 17
Redemption of shares of a fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders generally will recognize a gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and generally will be considered long-term, subject to
tax at a maximum rate of 28%, if shareholders have held such shares for a period
of more than 12 months but no more than 18 months and long-term, subject to tax
at a maximum rate of 20%, if shareholders have held such shares for a period of
more than 18 months. If a loss is realized on the redemption of fund shares, the
reinvestment in additional fund shares within 30 days before or after the
redemption may be subject to the "wash sale" rules of the Internal Revenue Code,
resulting in a postponement of the recognition of such loss for federal income
tax purposes.
In addition to the federal income tax consequences described above relating
to an investment in a fund, there may be other federal, state or local tax
considerations that depend upon the circumstances of each particular investor.
Prospective shareholders are therefore urged to consult their tax advisors with
respect to the effect of this investment on their own specific situations.
MANAGEMENT
INVESTMENT MANAGEMENT
The fund is a diversified, open-end series of American Century Quantitative
Equity Funds (the company). Under the laws of the State of California, the Board
of Directors is responsible for managing the business and affairs of the
company. 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 clients 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 it deems appropriate in pursuit of the fund's investment
objective. Individual portfolio manager members of the team also may adjust
portfolio holdings of the fund or of sectors of the fund as necessary between
team meetings. John Schniedwind, Senior Vice President and Group
Leader--Quantitative Equity, supervises the team that manages the fund.
The portfolio manager members of the team managing the fund and their work
experience for the last five years are as follows:
KURT BORGWARDT, Vice President, Portfolio Manager and Director of
Quantitative Equity Research, joined American Century in 1990, and has managed
the quantitative equity research effort since then.
WILLIAM MARTIN, Vice President and Portfolio Manager, joined American
Century in 1989.
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 a monthly fee
based on a percentage of the average net assets of the fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process: First, a
fee rate schedule is applied to the assets of all of the funds in a fund's
investment category that are managed by the manager (the Investment Category
Fee). The three investment categories are: Money Market Funds, Bond Funds and
Equity Funds. Second, a separate fee rate schedule is applied to the assets of
all of the funds managed by the manager (the Complex Fee). The Investment
Category Fee and the Complex Fee are then added to determine the unified
management fee payable by the fund to the manager. Currently, the Investment
Category Fee for the fund is an annual rate of 0.60% of the average net assets
of the fund. The Complex
18 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
Fee is currently an annual rate of 0.10% of the average net assets of the fund.
Further information about the calculation of the annual management fee is
contained in the Statement of Additional Information.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the fund by
the aggregate average daily closing value of the fund's net assets during the
previous month, and further multiplying that product by a fraction, the
numerator of which is the number of days in the previous month and the
denominator of which is 365 (366 in leap years).
CODE OF ETHICS
The fund and the manager have adopted a Code of Ethics that restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the fund's portfolio
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage the fund.
TRANSFER AND ADMINISTRATIVE SERVICES
American Century Services Corporation, American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111, acts as transfer agent and dividend-paying
agent for the fund. It provides facilities, equipment and personnel to the fund,
and is paid for such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the fund as a funding medium, by broker-dealers and financial advisors
for their customers investing in shares of American Century or by sponsors of
multi mutual fund no- or low-transaction fee programs. The manager or an
affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.
Although there is no sales charge levied by the fund, transactions in shares
of the fund may be executed by brokers or investment advisors who charge a
transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers and financial advisors, but in all cases will be retained
by the broker-dealer or financial advisor and not remitted to the fund or the
manager. You should be aware of the fact that these transactions may be made
directly with American Century without incurring such fees.
From time to time, special services may be offered to shareholders who
maintain higher share balances in our family of funds. These services may
include the waiver of minimum investment requirements, expedited confirmation of
shareholder transactions, newsletters and a team of personal representatives.
Any expenses associated with these special services will be paid by the manager
or its affiliates.
The manager and the transfer agent are both wholly owned by American Century
Companies, Inc. (ACC). James E. Stowers Jr., Chairman of the Board of Directors
of ACC, controls ACC by virtue of his ownership of a majority of its common
stock.
Pursuant to a Sub-Administration Agreement with the manager, Funds
Distributor Inc. (FDI) serves as the co-administrator for the fund. FDI is
responsible for (i) providing certain officers of the fund and (ii) reviewing
and filing marketing and sales literature on behalf of the fund. The fees and
expenses of FDI are paid by the manager.
YEAR 2000 ISSUES
Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. The
fund and the manager depend upon the computer systems of various service
providers, including the transfer agent, for their day-to-day operations.
Inadequate remediation of the Year 2000 problem by these service providers and
others with whom they interact could have an adverse effect on the fund's
operations, including pricing, securities trading and settlement, and the
provision of shareholder services.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 19
The transfer agent, in cooperation with the manager, has assembled a team of
information technology professionals who are taking steps to address Year 2000
issues with respect to its own computers and to obtain satisfactory assurances
that comparable steps are being taken by the fund's and the manager's other
major service providers and vendors. The key phases of the remediation plan
include: an inventory of all internal systems, vendor products and services and
data providers (substantially completed in 1997); an assessment of all systems
for date reliance and the impact of the century rollover on each (substantially
completed with respect to critical systems in early 1998); and the renovation
and testing of affected systems (targeted for completion with respect to
critical systems by the end of 1998). The manager will pay for the remediation
effort with revenues from its management fee, so that the fund will not directly
bear any of the cost.
In light of these remediation efforts, the fund does not anticipate a
material adverse impact on its business or operations. However, there can be no
assurance that the remediation plan will be sufficient and timely or that
interaction with other noncomplying computer systems will not have a material
adverse effect on the fund's business, operations or financial condition.
In addition, the issuers of the securities in which the fund invests may
have Year 2000 computer problems. Although the media and various regulatory
agencies have focused a great deal of attention on the need for issuers to
assess and remediate these problems, their failure to do so could hurt the
fund's performance.
DISTRIBUTION OF FUND SHARES
The fund's shares are distributed by FDI, a registered broker-dealer. FDI is
a wholly owned indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109. The Institutional Class of shares does not pay any commissions or sales
loads to the distributor or to any other broker-dealers or financial
intermediaries in connection with the distribution of fund shares.
Investors may open accounts with American Century only through the
distributor. All purchase transactions in the fund are processed by the transfer
agent, which is authorized to accept any instructions relating to fund accounts.
All purchase orders must be accepted by the distributor. All fees and expenses
of FDI in acting as distributor for the fund are paid by the manager.
FURTHER INFORMATION ABOUT AMERICAN CENTURY
American Century Quantitative Equity Funds is an 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 at 1-800-345-3533 (international
calls: 816-531-5575).
American Century Quantitative Equity Funds issues shares with no par value.
Each series is commonly referred to as a fund. The assets belonging to each
series of shares are held separately by the custodian and in effect each series
is a separate fund.
American Century offers three classes of the fund offered by this
Prospectus: an Investor Class, an Institutional Class and an Advisor Class. The
shares offered by this Prospectus are Institutional Class shares and have no
up-front charges, commissions, or 12b-1 fees.
The Investor Class is primarily made available to retail investors. The
Advisor Class is primarily offered to institutional investors or through
institutional distribution channels, such as employer-sponsored retirement plans
or through banks, broker-dealers, insurance companies or other financial
intermediaries. The other classes have different fees, expenses, and/or minimum
investment requirements than the Institutional Class. The difference in the fee
structures among the classes is the result of their separate arrangements for
shareholder and distribution services and not the result of any difference in
amounts charged by the manager for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
Different
20 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS
fees and expenses will affect performance. For additional information concerning
the other classes of shares not offered by this Prospectus, call us at
1-800-345-3533 or contact a sales representative or financial intermediary who
offers those classes of shares.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various classes are (a) each class
may be subject to different expenses specific to that class, (b) each class has
a different identifying designation or name, (c) each class has exclusive voting
rights with respect to matters solely affecting such class, (d) each class may
have different exchange privileges, and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.
Each share, irrespective of series or class, is entitled to one vote for
each dollar of net asset value applicable to such share on all questions, except
for those matters that must be voted on separately by the series or class of
shares affected. Matters affecting only one series or class are voted upon only
by that series or class.
Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.
Unless required by the Investment Company Act, it will not be necessary for
the fund to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the fund's by-laws, the holders of shares representing at
least 10% of the votes entitled to be cast may request the fund to hold a
special meeting of shareholders. We will assist in the communication with other
shareholders.
WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND PROCEDURES
DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL INFORMATION,
WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE SHAREHOLDER
APPROVAL IS EXPRESSLY REQUIRED.
PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 21
P.O. BOX 419385
KANSAS CITY, MISSOURI
64141-6385
INSTITUTIONAL SERVICES:
1-800-345-3533 OR 816-531-5575
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-345-1833 OR 816-444-3038
FAX: 816-340-4655
WWW.AMERICANCENTURY.COM
[american century logo(reg.sm)]
American
Century(reg.tm)
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[american century logo(reg.sm)]
American
Century(reg.tm)
JULY 30, 1998
AMERICAN
CENTURY
GROUP
Small Cap Quantitative
STATEMENT OF ADDITIONAL INFORMATION
JULY 30, 1998
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
This is the Statement of Additional Information for the American Century Small
Cap Quantitative Fund. This Statement is not a prospectus but should be read in
conjunction with the fund's current Prospectus dated July 30, 1998. Please
retain this document for future reference. To obtain the Prospectus, call
American Century Investments toll free at 1-800-345-2021 (international calls:
816-531-5575), or write P.O. Box 419200, Kansas City, Missouri 64141-6200.
TABLE OF CONTENTS
Investment Policies and Techniques ........................................ 2
Investment Restrictions ................................................... 8
Portfolio Turnover ........................................................ 9
Performance Advertising ................................................... 10
Capital Stock ............................................................. 11
Custodians ................................................................ 11
Independent Accountant .................................................... 12
Multiple Class Structure .................................................. 12
Brokerage ................................................................. 13
Officers and Directors .................................................... 14
Management ................................................................ 16
Holidays .................................................................. 17
STATEMENT OF ADDITIONAL INFORMATION 1
INVESTMENT POLICIES AND TECHNIQUES
The following pages provide a more detailed description of the securities
and investment practices identified in the Prospectus. Unless otherwise noted,
the policies described in this Statement of Additional Information are not
fundamental and may be changed by the Board of Directors.
U.S. GOVERNMENT SECURITIES
The fund may invest in U.S. government securities, including bills, notes
and bonds issued by the U.S. Treasury and securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some U.S. government
securities are supported by the direct full faith and credit pledge of the U.S.
government; others are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as securities issued by the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
government to purchase the agencies' obligations; and others are supported only
by the credit of the issuing or guaranteeing instrumentality. There is no
assurance that the U.S. government will provide financial support to an
instrumentality it sponsors when it is not obligated by law to do so.
REPURCHASE AGREEMENTS
In a repurchase agreement (repo), the fund buys a security at one price and
simultaneously agrees to sell it back to the seller at an agreed upon price on a
specified date (usually within seven days from the date of purchase) or on
demand. The repurchase price exceeds the purchase price by an amount that
reflects an agreed-upon rate of return and that is unrelated to the interest
rate on the underlying security. Delays or losses could result if the other
party to the agreement defaults or becomes bankrupt.
American Century Investment Management, Inc. (the manager) attempts to
minimize the risks associated with repurchase agreements by adhering to written
guidelines that govern repurchase agreements. These guidelines strictly govern
(i) the type of securities that may be acquired and held under repurchase
agreements; (ii) collateral requirements for sellers under repurchase
agreements; (iii) the amount of the fund's net assets that may be committed to
repurchase agreements that mature in more than seven days; and (iv) the manner
in which the fund must take delivery of securities subject to repurchase
agreements. Moreover, the Board of Directors reviews and approves, on a
quarterly basis, the creditworthiness of brokers, dealers and banks with whom
the fund may enter into repurchase agreements. The fund may enter into a
repurchase agreement only with an entity that appears on a list of entities that
have been approved by the Board as sufficiently creditworthy.
The fund has received permission from the Securities and Exchange Commission
(SEC) to participate in joint repurchase agreements collateralized by U.S.
government securities with other mutual fund advised by the manager. Joint repos
are expected to increase the income the fund can earn from repo transactions
without increasing the risks associated with these transactions.
WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS
The fund may engage in securities transactions on a when-issued or forward
commitment basis, in which the transaction price and yield are each fixed at the
time the commitment is made, but payment and delivery occur at a future date
(typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, the
fund assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Although the fund will make commitments to purchase or sell
securities on a when-issued or forward commitment basis with the intention of
actually receiving or delivering them, it may sell the securities before the
settlement date if doing so is deemed advisable as a matter of investment
strategy.
In purchasing securities on a when-issued or forward commitment basis, the
fund will establish and maintain until the settlement date a segregated account
consisting of cash or appropriate liquid assets including equity securities and
debt securities of any grade in an amount sufficient to meet the purchase price.
When the time comes to pay for the when-issued securities, the fund will meet
its obligations with available cash, through the sale of securities, or,
although it would not normally expect to do so, by
2 AMERICAN CENTURY INVESTMENTS
selling the when-issued securities themselves (which may have a market value
greater or less than the fund's payment obligation). Selling securities to meet
when-issued or forward commitment obligations may generate taxable capital gains
or losses.
CONVERTIBLE SECURITIES
The fund may buy securities that are convertible into common stock. Listed
below is a brief description of the various types of convertible securities the
fund may buy.
CONVERTIBLE BONDS are issued with lower coupons than nonconvertible bonds of
the same quality and maturity, but they give holders the option to exchange
their bonds for a specific number of shares of the company's common stock at a
predetermined price. This structure allows the convertible bond holder to
participate in share price movements in the company's common stock. The actual
return on a convertible bond may exceed its stated yield if the company's common
stock appreciates in value and the option to convert to common shares becomes
more valuable.
CONVERTIBLE PREFERRED STOCKS are nonvoting equity securities that pay a
fixed dividend. These securities have a convertible feature similar to
convertible bonds; however, they do not have a maturity date. Due to their
fixed-income features, convertible issues typically are more sensitive to
interest rate changes than the underlying common stock. In the event of
liquidation, bondholders would have claims on company assets senior to those of
stockholders; preferred stockholders would have claims senior to those of common
stockholders.
WARRANTS entitle the holder to buy the issuer's stock at a specific price
for a specific period of time. The price of a warrant tends to be more volatile
than, and does not always track, the price of its underlying stock. Warrants are
issued with expiration dates. Once a warrant expires, it has no value in the
market.
FOREIGN SECURITIES
Although the fund may buy securities of foreign issuers in foreign markets,
most of their foreign securities investments are made by purchasing American
Depositary Receipts (ADRs), "ordinary shares," or "New York Shares." The fund
may invest in foreign-currency-denominated securities that trade in foreign
markets if the manager believes that such investments will be advantageous to
the fund.
ADRs are dollar-denominated receipts representing interests in the
securities of a foreign issuer. They are issued by U.S. banks and traded on
exchanges or over the counter in the United States. Ordinary shares are shares
of foreign issuers that are traded abroad and on a U.S. exchange. New York
shares are shares that a foreign issuer has allocated for trading in the United
States. ADRs, ordinary shares, and New York shares all may be purchased with and
sold for U.S. dollars, which protects the fund from the foreign settlement risks
described below.
Investing in foreign companies may involve risks not typically associated
with investing in U.S. companies. The value of securities denominated in foreign
currencies and of dividends from such securities can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices in some foreign markets can be very volatile.
Many foreign countries lack uniform accounting and disclosure standards
comparable to those that apply to U.S. companies, and it may be more difficult
to obtain reliable information regarding a foreign issuer's financial condition
and operations. In addition, the costs of foreign investing, including
withholding taxes, brokerage commissions, and custodial fees, are generally
higher than for U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
governmental supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer and
may involve substantial delays. It also may be difficult to enforce legal rights
in foreign countries.
Investing abroad carries political and economic risks distinct from those
associated with investing in the United States. Foreign investments may be
affected by actions of foreign governments adverse to the interests of U.S.
investors, including the possibility of expropriation or nationalization of
assets, confiscatory taxation, restrictions on U.S. investment, or
STATEMENT OF ADDITIONAL INFORMATION 3
restrictions on the ability to repatriate assets or to convert currency into
U.S. dollars. There may be a greater possibility of default by foreign
governments or foreign-government-sponsored enterprises. Investments in foreign
countries also involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The manager may engage in foreign currency exchange transactions on behalf
of the fund in order to manage currency risk. Foreign currencies will be
purchased and sold regularly, either in the spot (i.e., cash) market or in the
forward market (through forward foreign currency exchange contracts, or "forward
contracts").
A forward contract is an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days agreed upon by the
parties, commencing with the date of the contract, at a price set at the time of
the contract. When the fund agrees to buy or sell a security denominated in a
foreign currency, it may enter into a forward contract to "lock in" the U.S.
dollar price of the security. By entering into a forward contract to buy or sell
the amount of foreign currency involved in a security transaction for a fixed
amount of U.S. dollars, the manager can protect the fund against possible loss
resulting from adverse changes in the relationship between the U.S. dollar and
the foreign currency between the date the security is purchased or sold and the
date on which payment is made or received. This type of transaction is sometimes
referred to as a "position hedge."
However, it should be noted that using forward contracts to protect the
fund's foreign investments from currency fluctuations does not eliminate
fluctuations in the prices of the underlying securities themselves. Forward
contracts simply establish a rate of exchange that can be achieved at some
future point in time. Additionally, although forward contracts tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they also
limit any gain that might result if the hedged currency's value increases.
Successful use of forward contracts depends on the manager's skill in
analyzing and predicting currency values. Although they are used for settlement
purposes, forward contracts alter the fund's exposure to currency exchange rate
activity and could result in losses to the fund if currencies do not perform as
the manager anticipates. The fund also may incur significant costs when
converting assets from one currency to another.
Foreign exchange dealers do not charge fees for currency conversions.
Instead, they realize a profit based on the difference (i.e., the spread)
between the prices at which they are buying and selling various currencies. A
dealer may offer to sell a foreign currency at one rate while simultaneously
offering a lesser rate of exchange on the purchase of that currency.
The fund uses forward contracts for currency hedging purposes only and not
for speculative purposes. The fund is not required to enter into forward
contracts with regard to its foreign holdings and will not do so unless it is
deemed appropriate by the manager.
The fund's assets are valued daily in U.S. dollars, although foreign
currency holdings are not physically converted into U.S. dollars on a daily
basis.
DEPOSITARY RECEIPTS
American Depositary Receipts and European Depositary Receipts (ADRs and
EDRs) are receipts representing ownership of shares of a foreign-based issuer
held in trust by a bank or similar financial institution. These are designed for
U.S. and European securities markets as alternatives to purchasing underlying
securities in their corresponding national markets and currencies. ADRs and EDRs
can be sponsored or unsponsored.
Sponsored ADRs and EDRs are certificates in which a bank or financial
institution participates with a custodian. Issuers of unsponsored ADRs and EDRs
are not contractually obligated to disclose material information in the United
States. Therefore, there may not be a correlation between such information and
the market value of the unsponsored ADR or EDR.
RESTRICTED SECURITIES
Restricted securities held by the fund generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act of 1933, or in a registered public offering. Where registration
is required, the fund may be required to pay all or a part of the registration
expense, and a considerable period may elapse
4 AMERICAN CENTURY INVESTMENTS
between the time it decides to seek registration of the securities and the time
it is permitted to sell them under an effective registration statement. If,
during this period, adverse market conditions were to develop, the fund might
obtain a less favorable price than prevailed when it decided to try to register
the securities.
SECURITIES LENDING
In order to realize additional income, the fund may lend its portfolio
securities. Such loans may not exceed one-third of the fund's net assets valued
at market except (i) through the purchase of debt securities in accordance with
its investment objective, policies and limitations, or (ii) by engaging in
repurchase agreements with respect to portfolio securities.
PUT OPTIONS ON INDIVIDUAL SECURITIES
The fund may buy puts with respect to stocks underlying its convertible
security holdings. For example, if the manager anticipates a decline in the
price of the stock underlying a convertible security the fund holds, it may
purchase a put option on the stock. If the stock price subsequently declines, an
increase in the value of the put option could be expected to offset all or a
portion of the effect of the stock's decline on the value of the convertible
security.
FUTURES AND OPTIONS TRANSACTIONS
FUTURES TRANSACTIONS. The fund may engage in futures transactions. Such
transactions may be used to maintain cash reserves while remaining fully
invested, to facilitate trading, to reduce transaction costs, or to pursue
higher investment returns when a futures contract is priced more attractively
than its underlying security or index.
Futures contracts provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency.
Although futures contracts, by their terms, generally call for actual
delivery or acceptance of the underlying securities, in most cases the contracts
are closed out before the settlement date. Closing out a futures position is
done by taking an opposite position in an identical contract (i.e., buying a
contract that has previously been sold, or selling a contract that has
previously been bought).
To initiate and maintain open positions in futures contracts, the fund is
required to make a good faith margin deposit in cash or appropriate securities
with a broker or custodian. A margin deposit is intended to assure completion of
the contract (delivery or acceptance of the underlying security) if it is not
terminated prior to the specified delivery date. Minimum initial margin
requirements are established by the futures exchanges and may be revised. In
addition, brokers may establish deposit requirements that are higher than the
exchange minimums.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, the contract holder
is required to pay an additional "variation" margin. Conversely, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to or
from the futures broker as long as the contract remains open and do not
constitute margin transactions for purposes of a fund's investment restrictions.
Those who trade futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities they hold or expect to acquire
for investment purposes. Speculators are less likely to own the securities
underlying the futures contracts they trade and are more likely to use futures
contracts with the expectation of realizing profits from fluctuations in the
prices of the underlying securities. The fund will not utilize futures contracts
for speculative purposes.
Although techniques other than trading futures contracts can be used to
control the fund's exposure to market fluctuations, the use of futures contracts
may be a more effective means of hedging this exposure. While the fund pays
brokerage commissions in connection with opening and closing out futures
positions, these costs are generally lower than the transaction costs incurred
in the purchase and sale of the underlying securities.
STATEMENT OF ADDITIONAL INFORMATION 5
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed "strike" price. In return for this right, the fund pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities prices, and futures contracts. The fund may terminate its
position in a put option it has purchased by allowing it to expire or by
exercising the option. If the option is allowed to expire, the fund will lose
the entire premium it paid. If the fund exercises the option, it completes the
sale of the underlying instrument at the strike price. The fund also may
terminate a put option position by closing it out in the secondary market at its
current price if a liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if security prices do not rise sufficiently to offset the cost of the
option.
WRITING PUT AND CALL OPTIONS. If the fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party chooses to exercise
the option. When writing an option on a futures contract, the fund will be
required to make margin payments to a broker or custodian as described above for
futures contracts. The fund may seek to terminate its position in a put option
before it is exercised by closing out the option in the secondary market at its
current price. If the secondary market is not liquid for a put option the fund
has written, however, the fund must continue to be prepared to pay the strike
price while the option is outstanding, regardless of price changes, and must
continue to set aside assets to cover its position.
If security prices rise, a put writer would generally expect to profit,
although the gain would be limited to the amount of the premium received. If
security prices remain the same over time, it is likely that the writer also
will profit by being able to close out the option at a lower price. If security
prices fall, the put writer would expect to suffer a loss. This loss should be
less than the loss from purchasing the underlying instrument directly, however,
because the premium received for writing the option should mitigate the effects
of the decline.
Writing a call option obligates the fund to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
COMBINED POSITIONS. The fund may purchase and write options in combination
with one another, or in combination with futures or forward contracts, in order
to adjust the risk and return characteristics of the overall position. For
example, the fund may purchase a put option and write a call option on the same
underlying instrument in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one strike
price and buying a call option at a lower price in order to reduce the risk of
the written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
OVER-THE-COUNTER OPTIONS. Unlike exchange-traded options, which are
standardized with respect to the underlying instrument, expiration date,
6 AMERICAN CENTURY INVESTMENTS
contract size, and strike price, the terms of over-the-counter (OTC) options
(options not traded on exchanges) generally are established through negotiation
with the other party to the option contract. While this type of arrangement
allows the fund greater flexibility in tailoring an option to its needs, OTC
options generally involve greater credit risk than exchange-traded options,
which are guaranteed by the clearing organizations of the exchanges where they
are traded. The risk of illiquidity is also greater with OTC options because
these options generally can be closed out only by negotiation with the other
party to the option.
OPTIONS ON FUTURES. By purchasing an option on a futures contract, the fund
obtains the right, but not the obligation, to sell the futures contract (a put
option) or to buy the contract (a call option) at a fixed "strike" price. The
fund can terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is exercised, the fund completes the sale
of the underlying security at the strike price. Purchasing an option on a
futures contract does not require the fund to make margin payments unless the
option is exercised.
CORRELATION OF PRICE CHANGES. Price changes of the fund's futures and
options positions may not be well correlated with price changes of its other
investments. This may be because of differences between the underlying indexes
and the types of securities in which the fund invests. For example, if the fund
sold a broad-based index futures contract to hedge against a stock market
decline while completing sales of specific securities in its investment
portfolio, the prices of the securities could move in a different direction than
the broad market index represented by the index futures contract. In the case of
an S&P 500 futures contract purchased by the fund, either in anticipation of
stock purchases or in an effort to be fully invested, failure of the contract to
track the index accurately could hinder the fund from achieving its investment
objective.
Options and futures prices also can diverge from the prices of their
underlying instruments even if the underlying instruments match the fund's
investments. Options and futures prices are affected by factors such as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract;
these factors may not affect security prices the same way. Imperfect correlation
also may result from differing levels of demand in the options and futures
markets and the securities markets, from structural differences in how option
and futures and securities are traded, or from the imposition of daily price
fluctuation limits or trading halts. The fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in an effort to compensate for differences in
volatility between the contract and the securities, although this strategy may
not be successful in all cases. If price changes in the fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF FUTURES CONTRACTS AND OPTIONS. Futures and options have risks
associated with their use: possible default by the other party to the
transaction; illiquidity; and, to the extent the manager's interpretation of
certain market movements is incorrect, the risk that the use of such
transactions could result in losses greater than if they had not been used.
Losses resulting from the use of these transactions would reduce net asset value
and possibly income.
There is no assurance a liquid secondary market will exist for any
particular futures contract or option at any particular time. Options may have
relatively low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges may
establish daily price fluctuation limits for futures contracts and options and
may halt trading if a contract's price moves upward or downward more than the
limit in a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund to
enter into new positions or close out existing positions. If the secondary
market for a contract were not liquid because of price fluctuation limits or
otherwise, prompt liquidation of unfavorable positions could be difficult or
impossible, and the fund could be required to continue holding a position until
delivery or expiration regardless of changes in value. Under these
circumstances, the fund's access to assets held to cover its futures and options
positions also could be impaired.
STATEMENT OF ADDITIONAL INFORMATION 7
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. The fund has filed
a notice of eligibility for exclusion as a "commodity pool operator" with the
CFTC and the National Futures Association, which regulates trading in the
futures markets. The fund intends to comply with Section 4.5 of the regulations
under the Commodity Exchange Act, which limits the extent to which the fund can
commit assets to initial margin deposits and options premiums.
The fund may enter into futures contracts, options, or options on futures
contracts, provided that such obligations represent no more than 20% of the
fund's net assets. Under the Commodity Exchange Act, the fund may enter into
futures and options transactions for hedging purposes without regard to the
percentage of assets committed to initial margin and option premiums and for
other than hedging purposes provided that assets committed to initial margin and
option premiums do not exceed 5% of the fund's net assets. To the extent
required by law, the fund will set aside cash and appropriate liquid assets in a
segregated account to cover its obligations related to futures contracts and
options.
The fund intends to comply with tax rules applicable to regulated investment
companies.
FUTURES AND OPTIONS RELATING TO FOREIGN CURRENCIES. The fund may purchase
and sell currency futures and purchase and write currency options to increase or
decrease its exposure to different foreign currencies. The fund also may
purchase and write currency options in conjunction with each other or with
currency futures or forward contracts.
Currency futures contracts are similar to forward currency exchange
contracts, except that they are traded on exchanges(and have margin
requirements) and have standard contract sizes and delivery dates. Most currency
futures contracts call for payment or delivery in U.S. dollars. The underlying
instrument of a currency option may be a foreign currency, which generally is
purchased or delivered in exchange for U.S. dollars, although it may be a
futures contract. The purchaser of a currency call obtains the right to purchase
the underlying currency, and the purchaser of a currency put obtains the right
to sell the underlying currency.
The uses and risks of currency futures and options are similar to those of
futures and options relating to securities or indexes, as described above.
Currency futures and option values can be expected to correlate with exchange
rates, but may not reflect other factors that affect the value of the fund's
investments. A currency hedge, for example, should protect a deutsche-mark
denominated security from a decline in the deutsche mark, but it will not
protect the fund against a price decline resulting from a deterioration in the
issuer's creditworthiness. Because the value of the fund's
foreign-currency-denominated investments will change in response to many factors
other than exchange rates, it may not be possible to match the amount of
currency options and futures to the value of the fund's foreign investments over
time.
INVESTMENT RESTRICTIONS
The fund's investment restrictions are set forth below. These investment
restrictions are fundamental and may not be changed without approval of a
majority of the outstanding votes of shareholders of the fund, as determined in
accordance with the Investment Company Act.
AS A FUNDAMENTAL POLICY, THE FUND SHALL NOT:
1) issue senior securities, except as permitted under the Investment
Company Act of 1940.
2) borrow money, except that the fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an amount not
exceeding 33 (1)/(3)% of the fund's total assets (including the amount
borrowed) less liabilities (other than borrowings).
3) lend any security or make any other loan if, as
a result, more than 33 (1)/(3)% of the fund's total assets would be
lent to other parties, except, (i) through the purchase of debt
securities in accordance with its investment objective, policies and
limitations, or (ii) by engaging in repurchase agreements with respect
to portfolio securities.
4) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments. This policy shall not prevent the
fund from investment in securities or other instruments backed by real
estate or securities of companies that deal in real estate or are
engaged in the real estate business.
8 AMERICAN CENTURY INVESTMENTS
5) concentrate its investments in securities of issuers in a particular
industry (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities).
6) act as an underwriter of securities issued by others, except to the
extent that the fund may be considered an underwriter within the
meaning of the Securities Act of 1933 in the disposition of restricted
securities.
7) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; provided that this
limitation shall not prohibit the fund from purchasing or selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities.
8) invest for purposes of exercising control over management.
In addition, the fund is subject to the following additional investment
restrictions, which are not fundamental and may be changed by the Board of
Directors.
AS AN OPERATING POLICY, THE FUND:
a) shall not purchase additional investment securities at any time during
which outstanding borrowings exceed 5% of the total assets of the fund.
b) shall not purchase any security or enter into a repurchase agreement
if, as a result, more than 15% of its net assets would be invested in
repurchase agreements not entitling the holder to payment of principal
and interest within seven days and in securities that are illiquid by
virtue of legal or contractual restrictions on resale or the absence of
a readily available market.
c) shall not sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amount to the securities sold
short, and provided that transaction in futures contracts and options
are not deemed to constitute selling securities short.
d) shall not purchase securities on margin, except that the fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with
futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
The fund shall not purchase any securities which would cause 25% or more of
the value of the fund's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. government, any state,
territory or possession of the United States, the District of Columbia or any of
their authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents, (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry, and (d) personal credit and business credit businesses will
be considered industries.
Unless otherwise indicated, percentage limitations included in the
restrictions apply at the time transactions are entered into. Accordingly, any
later increase or decrease beyond the specified limitation resulting from a
change in the fund's net assets will not be considered in determining whether it
has complied with its investment restrictions.
PORTFOLIO TURNOVER
The manager will consider the length of time the security has been held in
determining whether to sell it. Accordingly, the fund's rate of portfolio
turnover is not expected to exceed 150%.
The fund intends to purchase a given security whenever the manager believes
it will contribute to the stated objective of the fund. In order to achieve the
fund's investment objective, the manager will sell a given security, giving
consideration to how long or how short a period it has been held in the
portfolio, and 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, it may be
replaced with another security holding greater promise, it has reached its
optimum potential, there
STATEMENT OF ADDITIONAL INFORMATION 9
was a change in the circumstances of a particular company or industry or in
general economic conditions, or because of some combination of such reasons.
When a general decline in security prices is anticipated, the fund may
decrease or eliminate entirely its equity position and increase its cash
position, and when a rise in price levels is anticipated, the fund may increase
its equity position and decrease its cash position. However, it should be
expected that the fund will, under most circumstances, be essentially fully
invested in equity securities.
PERFORMANCE ADVERTISING
The fund may quote performance in various ways. Historical performance
information will be used in advertising and sales literature and should not be
considered an indication of future results.
Yield quotations are based on the investment income per share earned during
a particular 30-day period, less expenses accrued during the period (net
investment income), and are computed by dividing a fund's net investment income
by its share price on the last day of the period, according to the following
formula:
YIELD = 2 [(a - b + 1)(6 )- 1]
------
cd
where a = dividends and interest earned during the period, b = expenses
accrued for the period (net of reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
Total returns quoted in advertising and sales literature reflect all aspects
of the fund's return, including the effect of reinvesting dividends and capital
gain distributions and any change in the fund's net asset value during the
period.
Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in the fund over a
stated period and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant throughout the period. For example, a cumulative total return
of 100% over 10 years would produce an average annual total return of 7.18%,
which is the steady annual rate that would result in 100% growth on a compounded
basis in 10 years. While average annual total returns are a convenient means of
comparing investment alternatives, investors should realize that a fund's
performance is not constant over time but changes from year-to-year, and that
average annual returns represent averaged figures as opposed to actual
year-to-year performance.
In addition to average annual total returns, the fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount and may be calculated for a
single investment, a series of investments, or a series of redemptions over any
time period. Total returns may be broken down into their components of income
and capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return.
The fund's performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike American
Century funds, are sold with a sales charge or deferred sales charge. Economic
data that may be used for such comparisons may include, but are not limited to:
U.S. Treasury bill, note, and bond yields, money market fund yields, U.S.
government debt and percentage held by foreigners, the U.S. money supply, net
free reserves, and yields on current-coupon GNMAs (source: Board of Governors of
the Federal Reserve System); the federal funds and discount rates (source:
Federal Reserve Bank of New York); yield curves for U.S. Treasury securities and
AA/AAA-rated corporate securities (source: Bloomberg Financial Markets); yield
curves for AAA-rated tax-free municipal securities (source: Telerate); yield
curves for foreign government securities (sources: Bloomberg Financial Markets
and Data Resources, Inc.); total returns on foreign bonds (source: J.P. Morgan
Securities Inc.); various U.S. and foreign government reports; the junk bond
market (source: Data Resources, Inc.); the CRB
10 AMERICAN CENTURY INVESTMENTS
Futures Index (source: Commodity Index Report); the price of gold (sources:
London am/pm fixing and New York Comex Spot Price); rankings of any mutual fund
or mutual fund category tracked by Lipper Analytical Services, Inc. or
Morningstar, Inc.; mutual fund rankings published in major, nationally
distributed periodicals; data provided by the Investment Company Institute;
Ibbotson Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock
market performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The fund also may utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.
Indexes may assume reinvestment of dividends, but generally they do not
reflect administrative and management costs such as those incurred by a mutual
fund.
Occasionally statistics may be used to illustrate fund volatility or risk.
Measures of volatility or risk generally are used to compare the fund's net
asset value or performance to a market index. One measure of volatility is
"beta." Beta expresses fund volatility relative to the total market as
represented by the S&P 500. A beta of more than 1.00 indicates volatility
greater than the market, and a beta of less than 1.00 indicates volatility less
than the market. Another measure of volatility or risk is "standard deviation."
Standard deviation is used to measure variability of net asset value or total
return relative to an average over a specified period of time. The premise is
that greater volatility connotes greater risk undertaken to achieve desired
performance.
Pursuant to the Multiple Class Plan, the corporation may issue additional
classes of existing funds or introduce new funds with multiple classes available
for purchase. To the extent a new class is added to an existing fund, the
manager may, in compliance with SEC and NASD rules, regulations and guidelines,
market the new class of shares using the historical performance information of
the original class of shares. When quoting performance information for the new
class of shares for periods prior to the first full quarter after inception, the
original class' performance will be restated to reflect the expenses of the new
class. For periods after the first full quarter after inception, actual
performance of the new class will be used.
CAPITAL STOCK
The fund's capital stock is described in the Prospectus under the heading
"Further Information About American Century."
The corporation currently has six series of shares. American Century Small
Cap Quantitative Fund is described in this Statement of Additional Information.
The corporation may in the future issue one or more additional series. The
assets belonging to each series or class of shares are held separately by the
custodian and the shares of each series or class represent a beneficial interest
in the principal, earnings and profit (or loss) of investment and other assets
held for each series or class. Your rights as a shareholder are the same for all
series or class of securities unless otherwise stated. Within their respective
series or class, all shares have equal redemption rights. Each share, when
issued, is fully paid and non-assessable. Each share, irrespective of series or
class, is entitled to one vote for each dollar of net asset value represented by
such share on all questions.
In the event of complete liquidation or dissolution of the fund,
shareholders of each series or class of shares shall be entitled to receive, pro
rata, all of the assets less the liabilities of that series or class.
CUSTODIANS
Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, New York 11245 and
Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64106 serve as
custodians of the fund's assets. Services provided by the custodian banks
include (i) settling portfolio purchases and sales, (ii) reporting failed
trades, (iii) identifying and collecting portfolio income, and (iv) providing
safekeeping of securities. The custodians take no part in determining the fund's
investment policies or in determining which securities are sold or purchased by
the fund.
STATEMENT OF ADDITIONAL INFORMATION 11
INDEPENDENT ACCOUNTANT
PricewaterhouseCoopers LLP, City Center Square, 1100 Main Street, Suite 900,
Kansas City, Missouri 64105-2140, serves as the independent accountant to
examine the financial statements of the fund. As independent accountant of the
fund, PricewaterhouseCoopers provides 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 the
fund.
MULTIPLE CLASS STRUCTURE
The fund's Board of Directors has adopted a multiple class plan (the
Multiple Class Plan) pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such
plan, the fund may issue up to three classes: an Investor Class, an Advisor
Class and an Institutional Class.
The Investor Class is made available to investors directly by the investment
manager through Funds Distributor, Inc., the fund's distributor, for a single
unified management fee, without any load or commission. The Institutional and
Advisor Classes are made available to institutional shareholders or through
financial intermediaries that do not require the same level of shareholder and
administrative services from the manager as Investor Class shareholders. As a
result, the manager is able to charge these classes a lower unified management
fee. In addition to the management fee, however, the Advisor Class shares are
subject to a Master Distribution and Shareholder Services Plan (described below)
. The plan has been adopted by the fund's Board of Directors and initial
shareholder in accordance with Rule 12b-1 adopted by the SEC under the
Investment Company Act.
RULE 12B-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Directors and approved by its shareholders. Pursuant to such
rule, the Board of Directors and initial shareholder of the fund's Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan, with respect to the Advisor Class (the Plan), which is described below.
In adopting the Plan, the Board of Directors [including a majority who are
not "interested persons" of the fund (as defined in the Investment Company Act),
hereafter referred to as the "independent directors"] determined that there was
a reasonable likelihood that the Plan would benefit the fund and the
shareholders of the affected class. Pursuant to Rule 12b-1, information with
respect to revenues and expenses under the Plan is presented to the Board of
Directors quarterly for its consideration in connection with its deliberations
as to the continuance of the Plan. Continuance of the Plan must be approved by
the Board of Directors (including a majority of the independent directors)
annually. The Plan may be amended by a vote of the Board of Directors (including
a majority of the independent directors), except that the Plan may not be
amended to materially increase the amount to be spent for distribution without
majority approval of the shareholders of the affected class. The Plan terminates
automatically in the event of an assignment and may be terminated upon a vote of
the majority of the independent directors or by vote of a majority of the
outstanding voting securities of the affected class.
All fees paid under the Plan will be made in accordance with Section 26 of
the Rules of Fair Practice of the National Association of Securities Dealers
(NASD).
MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectus, the fund's Advisor Class of shares is made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. The distributor enters into contracts
with various banks, broker-dealers, insurance companies and other financial
intermediaries with respect to the sale of the fund's shares and/or the use of
the fund's shares in various investment products or in connection with various
financial services.
Certain recordkeeping and administrative services that are provided by the
fund's transfer agent for the
12 AMERICAN CENTURY INVESTMENTS
Investor Class shareholders may be performed by a plan sponsor (or its agents)
or by a financial intermediary for shareholders in the Advisor Class. In
addition to such services, the financial intermediaries provide various
distribution services.
To enable the fund's shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the fund's
investment manager has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares and the fund's Board of Directors has
adopted a Master Distribution and Shareholder Services Plan (the Distribution
Plan). Pursuant to such Plan, the Advisor Class shares pay the distributor a fee
of 0.50% annually of the aggregate average daily assets of the fund's Advisor
Class shares, 0.25% of which is paid for shareholder services (as described
above) and 0.25% of which is paid for distribution services.
Distribution services include any activity undertaken or expense incurred
that is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to, (a) the payment of sales
commission, ongoing commissions and other payments to brokers, dealers,
financial institutions or others who sell Advisor Class shares pursuant to
selling agreements; (b) compensation to registered representatives or other
employees of distributor who engage in or support distribution of the fund's
Advisor Class shares; (c) compensation to, and expenses (including overhead and
telephone expenses) of the distributor; (d) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (e) the preparation, printing and distribution of sales literature
and advertising materials provided to the fund's shareholders and prospective
shareholders; (f) receiving and answering correspondence from prospective
shareholders, including distributing prospectuses, statements of additional
information, and shareholder reports; (g) the providing of facilities to answer
questions from prospective investors about fund shares; (h) complying with
federal and state securities laws pertaining to the sale of fund shares; (i)
assisting investors in completing application forms and selecting dividend and
other account options; (j) the providing of other reasonable assistance in
connection with the distribution of fund shares; (k) the organizing and
conducting of sales seminars and payments in the form of transactional
compensation or promotional incentives; (l) profit on the foregoing; (m) the
payment of "service fees" for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD and (n)
such other distribution and services activities as the manager determines may be
paid for by the fund pursuant to the terms of the Distribution Plan and in
accordance with Rule 12b-1 of the Investment Company Act.
BROKERAGE
Under the management agreement between the fund and the manager, the manager
has the responsibility of selecting brokers to execute portfolio transactions.
The fund's policy is to secure the most favorable prices and execution of orders
on its portfolio transactions. So long as that policy is met, the manager may
take into consideration the factors discussed below when selecting brokers.
The manager receives statistical and other information and services without
cost from brokers and dealers. The manager evaluates such information and
services, together with all other information that it may have, in supervising
and managing the investments of the fund. 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 fund's brokerage business with one or more brokers who
provide information and services. Such information and services will be in
addition to and not in lieu of services required to be performed by the manager.
The manager does not utilize brokers that provide such information and services
for the purpose of reducing the expense of providing required services to the
fund.
The brokerage commissions paid by the fund may exceed those which another
broker might have charged for effecting the same transactions, because of the
value of the brokerage and research services provided by the broker. Research
services furnished by brokers through whom the fund effects securities
transactions may be used by the manager in servicing all of its accounts, and
not all such services may be
STATEMENT OF ADDITIONAL INFORMATION 13
used by the manager in managing the portfolios of the fund.
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 fund and the manager believe that the facilities, expert personnel and
technological systems of a broker often enable the fund 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 fund regularly places its
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.
OFFICERS AND DIRECTORS
The principal officers and directors of the corporation, their ages (listed
in parentheses), principal business experience during the past five years, and
their affiliation with the fund's 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, with the exception of Messrs. Stowers III, Lyons,
Looby, May, Leach and Zindel, Ms. Roepke and Ms. Wade, is 1665 Charleston Road,
Mountain View, California 94043. The address of Messrs. Stowers III, Lyons,
Looby, May, Leach and Zindel, Ms. Roepke and Ms. Wade is American Century, 4500
Main Street, Kansas City, Missouri 64111. All persons named as officers for the
corporation also serve in similar capacities for other funds advised by the
manager. Those directors that are "interested persons "as defined in the
Investment Company Act of 1940 are indicated by an asterisk (*).
*WILLIAM M. LYONS (42), Director (1998). Mr. Lyons is President, Chief
Operating Officer of ACC; Executive Vice President of ASC and ACIS; Assistant
Secretary of ACC; and Secretary of ACS and ACIS.
*JAMES E. STOWERS III (39), Chairman of the Board of Directors (1998) and
Director (1995). Mr. Stowers III is Chief Executive Officer and Director of ACC;
Chief Executive Officer and Director of ACS and ACIS.
ALBERT A. EISENSTAT (68), Director (1995). Mr. Eisenstat is an independent
Director of each of Commercial Metals Co. (1982), Sungard Data Systems (1991)
and Business Objects S/A (1994). Previously, he served as Vice President of
Corporate Development and Corporate Secretary of Apple Computer and served on
its Board of Directors (1985 to 1993).
RONALD J. GILSON, (51), Director (1995). Mr. Gilson is the Charles J. Meyers
Professor of Law and Business at Stanford Law School (1979) and the Mark and Eva
Stern Professor of Law and Business at Columbia University School of Law(1992).
He is counsel to Marron, Ried & Sheehy (a San Francisco law firm, 1984).
MYRON S. SCHOLES (57), Director (1988). Mr. Scholes was awarded the 1997
Nobel Memorial Prize in Economic Sciences for his role in the development of the
Black-Scholes option pricing model. Mr. Scholes is a principal of Long-Term
Capital Management (1993). He also is Frank E. Buck Professor of Finance at the
Stanford Graduate School of Business (1983), a Director of Dimensional Fund
Advisors (1982) and the Smith Breeden Family of Funds (1992). From August 1991
to June 1993, Mr. Scholes was a Managing Director of Salomon Brothers Inc.
(securities brokerage).
KENNETH E. SCOTT (69), Director (1988). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a Director of
RCM Capital Management (1994).
ISAAC STEIN (51), Director (1992). Mr. Stein is former Chairman of the Board
(1990 to 1992) and Chief Executive Officer (1991 to 1992) of Esprit de Corp.
(clothing manufacturer). He is a member of the Board of Raychem Corporation
(electrical equipment, 1993), President of Waverley Associates, Inc. (private
investment firm, 1983), and a Director of ALZA Corporation (pharmaceuticals,
1987). He is also a Trustee of Stanford University (1994) and Chairman of
Stanford Health Services (hospital, 1994).
JEANNE D. WOHLERS (53), Director (1988). Ms. Wohlers is a private investor,
and an independent Director and Partner of Windy Hill Productions, LP.
Previously, she served as Vice President and Chief
14 AMERICAN CENTURY INVESTMENTS
Financial Officer of Sybase, Inc. (software company, 1988 to 1992).
RICHARD W. INGRAM (42), President (1998); Executive Vice President and
Director of Client Services and Treasury Administration, Funds Distributor, Inc.
(FDI). Mr. Ingram joined FDI in 1995. Prior to joining FDI, Mr. Ingram served as
Vice President and Division Manager of First Data Investor Services Group, Inc.
(from March 1994 to November 1995) and before that as Vice President, Assistant
Treasurer and Tax Director-Mutual Funds of The Boston Company, Inc. (from 1989
to 1994).
*DOUGLAS A. PAUL (51), Secretary (1988), Vice President (1990), and General
Counsel (1990); Vice President and Associate General Counsel, ACS.
*MARYANNE ROEPKE (42), CPA, Treasurer (1995) and Vice President (1998);
Senior Vice President and Assistant Treasurer of ACS.
CHRISTOPHER J. KELLEY (33), Vice President (1998); Vice President and
Associate General Counsel of FDI. Mr. Kelley joined FDI in 1996. Prior to
joining FDI, Mr. Kelley served as Assistant Counsel at Forum Financial Group
(from April 1994 to July 1996) and before that as a compliance officer for
Putnam Investments (from 1992 to 1994).
MARY A. NELSON (34), Vice President (1998); Vice President and Manager of
Treasury Services and Administration of FDI. Ms. Nelson joined FDI in 1995.
Prior to joining FDI, Ms. Nelson served as Assistant Vice President and Client
Manager for The Boston Company, Inc. (from 1989 to 1994).
*JON ZINDEL (30), Tax Officer (1997); Director of Taxation (1996); Vice
President of ACS (1998); Tax Manager, Price Waterhouse LLP (1989).
*MERELE A. MAY (35), Controller (1996); Vice President of ACS (1998).
*ROBERT J. LEACH (32), Controller (1996).
*C. JEAN WADE (34), Controller, (1996).
DIRECTOR COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Total Compensation
Name of From the American Century
Director(1) Family of Funds(2)
- --------------------------------------------------------------------------------
Albert A. Eisenstat $69,250
Ronald J. Gilson $74,000
Myron S. Scholes $68,250
Kenneth E. Scott $77,000
Ezra Solomon(3) $ 3,500
Isaac Stein $69,500
Jeanne D. Wohlers $72,500
- --------------------------------------------------------------------------------
(1) Interested Directors receive no compensation for their services as such.
(2) Includes compensation paid by the 13 investment company members of the
American Century family of funds.
(3) Retired December, 1996.
As of June 30, 1998, the fund's Directors and officers as a group owned less
than 1% of the fund's outstanding shares.
The corporation has adopted the American Century Mutual Funds Deferred
Compensation Plan for Non-Interested Directors. Under the Plan, the
non-interested person directors may defer receipt of all or part of the fees to
be paid to them for serving as directors of the corporation.
Under the Plan, all deferred fees are credited to an account established in
the name of the directors. The amounts credited to the account then increase or
decrease, as the case may be, in accordance with the performance of one or more
of the American Century funds that are selected by the director. The account
balance continues to fluctuate in accordance with the performance of the
selected fund or funds until final payment of all amounts credited to the
account. Directors are allowed to change their designation of mutual funds from
time to time.
No deferred fees are payable until such time as a director resigns, retires
or otherwise ceases to be a member of the Board of Directors. Directors may
receive deferred fee account balances either in a lump sum payment or in
substantially equal installment payments to be made over a period not to exceed
10
STATEMENT OF ADDITIONAL INFORMATION 15
years. Upon the death of a director, all remaining deferred fee account balances
are paid to the director's beneficiary or, if none, to the director's estate.
The Plan is an unfunded plan and, accordingly, American Century has no
obligation to segregate assets to secure or fund the deferred fees. The rights
of the directors to receive their deferred fee account balances are the same as
the rights of a general unsecured creditor of the corporation. The Plan may be
terminated at any time by the administrative committee of the Plan. If
terminated, all deferred fee account balances will be paid in a lump sum.
No deferred fees were paid to any director under the Plan during the fiscal
year ended December 31, 1997.
Those directors who are "interested persons," as defined in the Investment
Company Act, receive no fee as such for serving as a director. The salaries of
such individuals, who also are officers of the fund, are paid by the manager.
MANAGEMENT
A description of the responsibilities and method of compensation of the
fund's manager, American Century Investment Management, Inc., appears in the
Prospectus under the caption "Management."
For the services provided to the fund, the manager receives a monthly fee
based on a percentage of the average net assets of the fund. The annual rate at
which this fee is assessed is determined monthly in a two-step process. First, a
fee rate schedule is applied to the assets of all of the funds in a fund's
investment category which are managed by the manager (the Investment Category
Fee). Second, a separate fee rate schedule is applied to the assets of all of
the funds managed by the manager (the Complex Fee). The Investment Category Fee
and the Complex Fee are then added to determine the unified management fee
payable by the fund to the manager.
The schedule by which the Investment Category Fee is determined is as
follows:
Category Assets Fee Rate
- --------------------------------------------------------------------------------
First $1 billion 0.7200%
Next $5 billion 0.6600%
Next $15 billion 0.6160%
Next $25 billion 0.5690%
Next $50 billion 0.5420%
Next $150 billion 0.5390%
Thereafter 0.5380%
- --------------------------------------------------------------------------------
The Complex Fee Schedule (Investor Class) is as follows:
Category Assets Fee Rate
- --------------------------------------------------------------------------------
First $2.5 billion 0.3100%
Next $7.5 billion 0.3000%
Next $15.0 billion 0.2985%
Next $25.0 billion 0.2970%
Next $50.0 billion 0.2960%
Next $100.0 billion 0.2950%
Next $100.0 billion 0.2940%
Next $200.0 billion 0.2930%
Next $250.0 billion 0.2920%
Next $500.0 billion 0.2910%
Thereafter 0.2900%
- --------------------------------------------------------------------------------
The Complex Fee schedule for the Institutional Class is lower by 0.2000% at
each graduated step. For example, if the Investor Class Complex Fee is 0.3000%
for the first $2 billion, the Institutional Class Complex Fee is 0.1000%
(0.3000% minus 0.2000%) for the first $2 billion. The Complex Fee schedule for
the Advisor Class is lower by 0.2500% at each graduated step.
On the first business day of each month, the fund pays a management fee to
the manager for the previous month at the specified rate. The fee for the
previous month is calculated by multiplying the applicable fee for the fund by
the aggregate average daily closing value of the fund's net assets during the
previous month by a fraction, the numerator of which is the number of days in
the previous month and the denominator of which is 365 (366 in leap years).
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (1) the fund's
Board of Directors, or by the vote of a majority of outstanding votes (as
defined in the Investment Company Act)
16 AMERICAN CENTURY INVESTMENTS
and (2) by the vote of a majority of the directors of the fund 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 fund's Board of Directors, or by a vote of
a majority of the fund's shareholders, on 60 days' written notice to the
manager, and that it shall be automatically terminated if it is assigned.
The management agreement provides that the manager shall not be liable to
the fund or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.
The management agreement also provides that the manager and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.
Certain investments may be appropriate for the fund and also for other
clients advised by the manager. Investment decisions for the fund and other
clients are made with a view to achieving their respective investment objectives
after consideration of such factors as their current holdings, availability of
cash for investment, and the size of their investment generally. A particular
security may be bought or sold for only one client or series, or in different
amounts and at different times for more than one but less than all clients or
series. In addition, purchases or sales of the same security may be made for two
or more clients or series on the same date. Such transactions will be allocated
among clients in a manner believed by the manager to be equitable to each. In
some cases this procedure could have an adverse effect on the price or amount of
the securities purchased or sold by the fund.
The manager may aggregate purchase and sale orders of the fund with purchase
and sale orders of its other clients when the manager believes that such
aggregation provides the best execution for the fund. The fund's Board of
Directors has approved the policy of the manager with respect to the aggregation
of portfolio transactions. Where portfolio transactions have been aggregated,
the fund participates at the average share price for all transactions in that
security on a given day and share transaction costs on a pro rata basis. The
manager will not aggregate portfolio transactions of the fund unless it believes
such aggregation is consistent with its duty to seek best execution on behalf of
the fund and the terms of the management agreement. The manager receives no
additional compensation or remuneration as a result of such aggregation.
In addition to managing the fund, the manager also acts as an investment
advisor to 12 institutional accounts and to the following registered investment
companies: American Century Mutual Funds, Inc., American Century World Mutual
Funds, Inc., American Century Premium Reserves, Inc., American Century Variable
Portfolios, Inc., American Century Capital Portfolios, Inc., American Century
Strategic Asset Allocations, Inc., American Century Municipal Trust, American
Century Government Income Trust, American Century Investment Trust, American
Century Target Maturities Trust, American Century California Tax-Free and
Municipal Funds, and American Century International Bond Funds.
American Century Services Corporation provides physical facilities,
including computer hardware and software and personnel, for the day-to-day
administration of the fund and of the manager. The manager pays American Century
Services Corporation for such services.
HOLIDAYS
The fund does 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, Martin Luther
King Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
STATEMENT OF ADDITIONAL INFORMATION 17
P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
INVESTOR SERVICES:
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE:
1-800-345-8765
TELECOMMUNICATIONS DEVICE FOR THE DEAF:
1-800-634-4113 OR 816-444-3485
FAX: 816-340-7962
WWW.AMERICANCENTURY.COM
[american century logo(reg.sm)]
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